RBC Homeowner’s Survey

Via Barron’s (print ed) comes this fascinating survey by RBC Capital. They asked over 1,000 U.S. Homeowners numerous questions. Here are some of the more interesting answers:

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75.6%: see their Home’s value climbing over the next few years

46%: expect a gain of 5% or more annually

30%: foresee a rise of 10% to 15% a year

70%: said their home’s value has risen 10% or more in the past 3 years

6%  think their home’s value will sink in the next few years

7.8%: worry that their mortgage might exceed the value of their home
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Any similarities between home owners and equity investors circa 2000 is strictly coincidental…

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UPDATE 2 October 8, 2006 10:07am

OK, you guys are getting crazy in comments. Its a full blown smackdown, and I am staying out of it Over 100 comments in a day. That may also be a BP record.

In the spirit of full RE disclosure, I wanted to reveal this: We had looked at a house back in the Spring — we were literally the first ones to see it. Big property, a rather odd flag lot (100 yards off the road), built in the 50s (not our usual preference).

It was all original, and needed everything: Kitchen, baths, roof, major landscaping, garage doors, gutter and leaders. I figured it needed $100 -150k worth of work.  Which means it was probably closer to $200k in renovations.

Since then, Mrs. BP saw it on MLS, some 20% below prior asking price. She called our agent, thinking it was a typo. It wasn’t.

We made an offer 11% below that. Turns out we were the 2nd highest bidder. A year ago, we might have been drawn into a bidding war. Not this time. Patience remains the operative word in RE.

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UPDATE October 7, 2006 1:17pm

Wow!  57 comments in 3 1/2 hours. That’s some kind of BP record. I am posting somethng else above to encourage the debate to move on, but I will leave comments open for those of you still interested.

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Source:
Review & Preview
Barron’s, page 14
October 9, 2006

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  1. Larry Nusbaum commented on Oct 7

    “Any similarities between home owners and equity investors circa 2000 is strictly intentional:”

    You mean the dirt can go from $400,000 to $4,000 almost overnight?
    Or, that insiders can sell while pumping up the house’s value on TV?
    Or, they can issue more shares in my house?
    Or, the analysts can keep a buy rating on my house, while confessing in private emails that my neighborhood sucks?
    Or, we can be attacked again and they can close the housing market for a week?
    Or, they can cook the books on my Schedule E?
    Or, maybe they could issue title to my house to 7 people at a time?
    How about moving my loan off-shore thus removing it from my personal balance sheet?

  2. Larry Nusbaum commented on Oct 7

    A stock is a click of a button or a call and you are out. There is no clicking in RE transactions. However, let’s say the bubble pops next week……my property still exists, the land still has value, my rent still gets paid and my mortgage payment remains the same.

    Unlike stocks, whose leadership always changes with every new bull cycle, real estate (housing) can always be cured by time. Think about that.

  3. Barry Ritholtz commented on Oct 7

    Larry,

    I am not referncing the asset class, but rather the investor sentiment towards their ownership of it.

    Homes have an intrinisic value that a publicly traded company whose biggest asset was a cute sock puppet never could. But its the psychology between the owner/investor and that asset class which I find both fascinating and somewhat parallel . . .

  4. Larry Nusbaum commented on Oct 7

    “sentiment” was almost everything for the individual investor back in 2000/2001 and for 90% of homeowners means nothing today since they usually take no actions with regards to buying or selling. Misinformation and marketing of stocks was everything in 2000. It makes no difference how someone responds to “75.6%: see their Home’s value climbing over the next few years”, unless of course they plan to quit their jobs, empty their 401K and buy 7 more houses

  5. Barry Ritholtz commented on Oct 7

    AHHH, but it does mean something to the people who price their homes for sale, and to the offers that buyers are willing to make.

  6. Larry Nusbaum commented on Oct 7

    “I am not referncing the asset class, but rather the investor sentiment towards their ownership of it.”

    The implication is that the individual is setting themselves up for a bubble.
    The survey says that, “46%: expect a gain of 5% or more annually”. Almost half. Well, why is that so unrealistic? In Phoenix we have experienced almost 8% annual growth since 1980.

  7. Larry Nusbaum commented on Oct 7

    “AHHH, but it does mean something to the people who price their homes for sale, and to the offers that buyers are willing to make.”

    Nope, not a thing. Put another way, sellers always think more of their own home than the one across the street. That includes Nouriel Roubini who predicts a 20-30% drop in prices nationwide, but only 5-10% in his own NYC. LOL!

  8. Larry Nusbaum commented on Oct 7

    What I am saying is that “sentiment” means almost nothing with regards to implications in the housing market…..at least in a similar way as to the stock market.

  9. Larry Nusbaum commented on Oct 7

    “7.8%: worry that their mortgage might exceed the value of their home”

    ANd, the Re-Fi business is booming again in an effort to get individual situations fixed asap. That’s a good thing because each re-fi is one more owner taken off “credit watch”…….
    People are and have been thinking about this.

  10. Barry Ritholtz commented on Oct 7

    I disagree — sentiment can grip an entire population.

    How else can you explain some of the wackier real estate transactions, and why they look silly a year later — it s not all interest rates — its also psychology.

  11. Larry Nusbaum commented on Oct 7

    The real estate sentiment has been high for years and years. Remember, we have seen that this boom started not in 2003 or 2004, but in 1997. So, just because RBC has a sentiment report now doesn’t mean that everyone is jumping on late in the cycle like we saw in 2000. Quite the opposite. We have had many sitting on the sidelines (note the huge drop in sales in 2006) or actually selling in favor of renting.
    NASDAQ’s big move was in 2000 and specifically in the last quarter of 2000 just before it crashed.

  12. Larry Nusbaum commented on Oct 7

    “wackier real estate transactions”
    WHAT THE HECK IS THAT? Give me an example. (and, I bet it represents a small portion of all housing transactions! (please stop using the word “real estate”, because it’s housing that is in the forefront of the discussion)

  13. Larry Nusbaum commented on Oct 7

    “I disagree — sentiment can grip an entire population.”
    Sentiment, in the case of housing, is supported by real experience the past 8 years. People have doen very well in real estate and specifically in housing, most of which was over an extended and real period of time in which people generally don’t think that they’ll surrender the majority of those gains over the next 8 years like they did with Nortel and Lucent.

    BTW, just got my appraisal in on EMC and it’s bad! $12.78 and I paid over $70! lol

  14. Schahrzad Berkland commented on Oct 7

    Nusbaum, Roubini did not say his neighborhood would drop 5-10%. This is a quote form his New York Real Estate Magazine interview:

    “Will there be a fire sale in the city?
    I’d expect prices to be 5 to 10 percent lower a year from now, on average. ”

    Barry is right: homes are sold at the margin, so the price of the 1.1 mil San Diego homes is set by the sales price of 2800 people this month. If only half of them are distress sales, you can effectively have 1400 people lower the price for the other million. Psychology is everthing, because interest rates are down, lending is still loose,but the euphoria and urgency has worn off.

  15. Larry Nusbaum commented on Oct 7

    Roubini did not say his neighborhood would drop 5-10%. This is a quote form his New York Real Estate Magazine interview:
    “Will there be a fire sale in the city?
    I’d expect prices to be 5 to 10 percent lower a year from now, on average. ”

    Exactly what I just posted. And, he sees the rest of the country down 20-30%. I’ll bet anything that had he been a renter he would have predicted a crash in NYC! He’s just like any other owner: His property is special.

  16. Larry Nusbaum commented on Oct 7

    “Will there be a fire sale in the city?
    I’d expect prices to be 5 to 10 percent lower a year from now, on average. On the national level, real home prices may fall 20 to 30 percent. ”

  17. Larry Nusbaum commented on Oct 7

    Schahrzad Berkland : “Psychology is everthing,” AND THEREFORE WHAT?

  18. MAS commented on Oct 7

    No more coffee this morning for Larry. :)

  19. schahrzad berkland commented on Oct 7

    Roubini was misquoted in that article, Larry. Read his blog. He explains that he expects the national prices to fall 20-30% over 3 years. That’s why I excluded that quote, because it was wrong.

  20. schahrzad berkland commented on Oct 7

    Roubini’s blog, 9/25/06

    “PS: one of my views on housing prices is incorrectly reported in this interview; i have argued recently (see http://www.rgemonitor.com/blog/roubini/145489/) that real home prices will fall 20 to 30% over the next three years or so, not over the next year as incorrectly reported in this interview. So, do not worry: the housing price bust will be in slow motion, not all in one year.”

  21. Vega commented on Oct 7

    Larry, come on. Sentiment is sentiment is sentiment. The asset class does not matter. And ten years of bullish sentiment in real estate is not really much of anything. It’s nice, don’t misunderstand me, but you, proud owner of property in Phoenix of all places, surely must understand the inanity of today’s property market. Consider ARMs and option ARMs and 40 and 50 year loans and all the other products out there Joe Sixpack is using to shoehorn himself into something he cannot affort. Now witness the rush to the exit.

    Larry, people are ‘counting’ on their real estate equity build-up for retirement. What a joke. But consider the issues driving all the exotic loans out there people are using. The fact of the matter is that real personal income is flat to down and real home prices are up anywhere from 50 to 100% in many large markets over the last ten years.

    Sentiment has everything in the world to do with the run up, and it will continue to have a lot to do with the run down we are seeing. Have you been to Myrtle Beach or Orlando or Louden county, VA, or NYC or most of CA or Denver or the Hamptons or Detroit (for G-d’s sake) or ANYWHERE, and have you seen how much property is for sale NOW? It is mind boggling. And don’t kid yourself. Most of these people are NOT kicking tires. They’ve been watching their property value go up and up and up and they have done nothing but sit on that property and think to themselves, “Gee, aren’t I smart?” Well, sure, I guess they’re smart if they can monetize that asset when they want to, but the problem is that everyone wants to monetize that asset now because they know they need that money, they’ve been counting on it. As a side, the savings rate for folks 42 and younger in the USA is MINUS 18%. But I digress… Back to sentiment. What’s going to kill sentiment is the fact that most buyers AT THE MARGIN have decided enough is enough.

    For anyone to suggest that because RE sentiment cannot and has not turned on a dime because ‘it’s been high for years’ is naive. Or, to quote you: “What I am saying is that “sentiment” means almost nothing with regards to implications in the housing market.” If you don’t think the property market can turn for many, many years, I urge you to study Japan in the ’90s; to study Florida post 1924 and the recession of 1991; to study CA and NYC and NJ and CT post ANY recession; to study Texas after the oil shocks in the ’70s and ’80s; to study what the real rate of house price appreciation in The Netherlands has been since Tulipmania ended (about 0.3% growth since 1650).

    Really, it gets down to this: there is something very interesting that tends to unfold over very long periods of time in the markets and some people call it ’emotional symmetry.’ You have seen a bull market in equities here for 20 years and it’s been nice but I’m here bet that sooner or later we’re gonna have a stretch that is the exact opposite in terms of emotional output. Emotions, prices, whatever, they are all linked. It’s happened before, it’ll happened again, just wait. Real estate is no different than stocks. In fact, I’d argue it’s worse because most people don’t manage their property as an asset. An asset has value and generally that value is derived from either 1) someone’s willingness to pay you more for it than you paid yourself, or 2) more concretely, its ability to generate more cash than it uses. What percent of people are generating cash from their property? Huh? It’s a joke.

    RE is an expense for most people until the day comes when they gotta sell it. And sentiment is turning everywhere. And if the back-end of the yield curve should flip higher for some ungodly reason, it’s going to be so much more worse than it already is.

    Now, I know you are fired up about this. Just look at you trading posts with Barry. I’m not going to get into a war of words. I’ve said what I want to say and that’s it. And I see what you’ve said, too, so thank you.

  22. Schahrzad Berkland commented on Oct 7

    Larry, psychology in investing is explained well by Shiller. On the way up, asset bubbles are formed by psychology: fear of being left out, greed to make money at all costs. On the way down, you get fear of losing money, as most buyers are on the sidelines.

    The lower housing prices fall in a real estate down cycle, the fewer people want to buy them. You would think that people would jump at the chance to get thes homes at a cheaper price, but look at the data. In San Diego, we are back to 2004 prices, yet we have almost half the sales. In July 04, we sold 4200 homes, and in July 06 we sold 2600 homes. As prices keep dropping, so will sales.

    As the housing bubble rose from 2000 – 2005, sales peaked at 4,200 per month. The higher prices did not keep buyers away. That’s the psychology: rising prices bring more buyers, lower prices bring fewer buyers. Where else but in an asset bubble does this happen.

    At the car dealership, if a car is 20% off, do it sales DEcrease? If my favorite Lilly Pulitzer outfit is on sale, do I postpone its purchase? When Nordstrom raises the price of its shoes, do MORE people buy? No, to all of the above. But that is exactly the psychology of an asset bubble. People buy and sell based on fear and greed, not logic.

  23. s berkland commented on Oct 7

    Oh, you own property in Phoenix? I lived there 10 years, until 1999, when I moved to San Diego.

    When I started my first job in Phoenix out of college, our marketing manager was upside down on her mortgage. The year was 1988. She had her house for sale for 4 years, until finally she broken even in 1992 and sold the house and left Phoenix for good.

  24. DD commented on Oct 7

    why is the guy from financialRX so angry? blogging is supposed to get you through your midlife crises dude…not make you angrier…go lift weights or something…but the irony of your statement is that maybe I SHOULD get my news from al jazeera considering that the arab world and the big red chinese machine are financing our “record highs” or national debt our consumer glut your real estate boom and what not and i don’t think you disagree much.

    ppl seem to be angry in general…what does that mean for you sentiment gauge?

    and to say that a lot of real estate transaction have been “wacky” is naive it has been noted since at least 2003 and that’s before it really got “wacky”.

  25. ss23 commented on Oct 7

    larry nassbayum..wake up..Homes have intrinsic value..typically about 40-50% of the prices they quote now..

  26. Skoobz commented on Oct 7

    Larry Nusbaum, your book must be selling great if you have time to troll.

  27. Mark commented on Oct 7

    I do not understand why someone who writes a supposed real estate investment blog (“Millionaire Now!” Tee Hee.) is constantly inserting serial comments into other people’s blogs! Strikes me as strange. And a bit pathetic.

  28. Barry Ritholtz commented on Oct 7

    Now kids, we want everyone here to play nice — this is a forum for debate and discussion, not a playground sandbox where dirt gets thrown.

  29. Larry Nusbaum commented on Oct 7

    Mark: that’s true, you don’t understand. It’s an investment blog, not real estate.
    Please keep the personal attacks coming.

    “Larry, come on. Sentiment is sentiment is sentiment. The asset class does not matter. And ten years of bullish sentiment in real estate is not really much of anything. ”

    Sentiment has gone through some bad periods in housing over the past 75 years, but never a housing bubble. Wonder why……….

  30. Larry Nusbaum commented on Oct 7

    “Roubini was misquoted in that article, Larry. Read his blog. He explains that he expects the national prices to fall 20-30% over 3 years. That’s why I excluded that quote, because it was wrong.
    Posted by: schahrzad berkland ”

    I got it from his site. NYC’s appreciation from 2000-2005 was 79% and he only thinks it could decline 5-10%? LMAO! That’s not the disaster that’s he’s touting. The nature of a bubble is that it “pops”…..

  31. Larry Nusbaum commented on Oct 7

    “Larry, people are ‘counting’ on their real estate equity build-up for retirement. What a joke.”

    Maybe. But, the average boomer only has $55,000 in home equity saved for retirement. (and, $55,000 cash)

  32. Larry Nusbaum commented on Oct 7

    Larry Nusbaum, your book must be selling great if you have time to troll.
    Posted by: Skoobz | Oct 7, 2006 11:14:50 AM

    To some, anyone with a difference of opinion to their own is a “Troll”. Well said, Einstein.

  33. Mark commented on Oct 7

    Since Barry has asked me to play nice I withdraw my characterization of Larry’s “Millionaire Now!” as a supposed real estate investment blog.

  34. Larry Nusbaum commented on Oct 7

    “The lower housing prices fall in a real estate down cycle, the fewer people want to buy them. You would think that people would jump at the chance to get thes homes at a cheaper price, but look at the data.”

    Not, if they already bought.

  35. Zephyr commented on Oct 7

    It really makes little difference to the vast majority of homeowners. You have to live somewhere so you will be demanding a unit either as a renter or owner. If you are an investor then market timing and direction become much more significant.

  36. MAS commented on Oct 7

    Larry,
    Is your issue on the definition of “bubble”? Because a real estate transaction is a physical asset and can’t be sold as fast as a share of stock, it can never decline as quickly. We will never have a single day or month drop off, therefore there is no housing bubble. Is this just a debate over definition?

    And if so, is there a better term we should be using to define a 5-30% drop in home prices over the next 1-3 years?

    MAS

  37. Larry Nusbaum commented on Oct 7

    Zephyr: Sometimes I think that they forget that investors have made up about 10% of the market (here) over the past 8 years.
    Moreover, they never add a “therefore” to the end of their posts. Most people will not care. However, those who took action by selling in 2003 or 2004 not only lost out on a fabulous 2005, but also made their new landlords happy. That helps explain why vacancies are way down and rents going up. THE BUBBLE CROWD IS DETERMIMED TO MAKE THEIR LANDLORDS RICH(ER).

  38. phil commented on Oct 7

    larry can’t seem to grasp that a lot of people got extremely levered to get into their homes. you think at a debt to equity ratio of 5:1 you can sail through multiyear decline of singles digits? you think that all those people who barely qualified for an option ARM can just refi into a fixed rate mortgage? think again. just a couple missed payments and your FICO score goes into freefall.

    btw, equities are infinite assets, housing isn’t. Larry, those cardboard plywood tract homes that are popping up everywhere in north Phoenix will not be worth more 25 yrs from now, the land might-

  39. Larry Nusbaum commented on Oct 7

    MAS: I don’t have any “issue”. I make no predictions on housing. I could care less. Not sure why so many posters care since those genius’ all sold at the top and will buy when prices decline by 60-75%.
    They need this bubble to pop.
    So what if prices decline a bit in the short-term? How does that affect you & me?

  40. Zephyr commented on Oct 7

    Residential real estate prices are declining in most major markets and I expect that this decline will continue for a few years. As an investor I am waiting – as I did during the last two cycle declines. The time to buy will come a few years from now.

    The cycle can be tough. In Los Angeles during the boom of the 1980s I sold much of my property in 1989 because I expected a bloodbath. That was an unusually bad downcycle for reasons that I saw in advance.

    As for this cycle, two years ago I decided that this market would peak in 2005. However, I decided that I would not sell this time because I expected the decline would not be severe enough to justify the expense and tax hit from selling (my properties are on average worth about 4x what I paid for them). So I will ride it out. I will buy heavily after the market hits bottom. I expect to be buying in 2009 or 2010.

  41. Larry Nusbaum commented on Oct 7

    “btw, equities are infinite assets, housing isn’t. Larry, those cardboard plywood tract homes that are popping up everywhere in north Phoenix will not be worth more 25 yrs from now, the land might-”

    NEITHER WILL 75% of TODAY’S MARKET LEADERS ON THE NASDAQ. SO WHAT? WHAT’S YOUR POINT, EXACTLY?

  42. MAS commented on Oct 7

    I sold my SoCal house in Feb2006 for a NICE profit. Now I’m renting while prices all around San Diego (especially downtown) are falling. If decline a “bit in the short-term” equals a huge savings, then I guess it does effect me. :)

  43. Larry Nusbaum commented on Oct 7

    Zephyr: Southern California was hard hit (1990-1995) after the consolidation of the large defense contractors and all the layoffs at once.
    Your plan this time is very sound. Very unemotional. Nice job.

  44. phil commented on Oct 7

    btw, ISI which i’ve found to be pretty accurate contrary to what i’ve seen written about them on here, points out that the Great One, Wayne Gretzky has had to reduce the price on his mansion to $6.5 mln. the original asking price: $25 mln

  45. Zephyr commented on Oct 7

    As an investor I feel that timing is important. I do not believe in dollar cost averaging or in diversification. I focus my money on the few best bets that I can find.

    I was a buyer of property from 1998 through 2003. In March of 2003 I jumped into the stock market (leveraging myself to the eyeballs) – believing in March of 2003 that, with the Dow at about 7300, stocks were cheap. This year I have been slowly selling my stock because (unlike real estate) I expect stock prices will fall fast in the not to distant future. I have been using the proceeds from the sales to payoff the debt from 2003, and to buy 10 year treasury bonds. So far so good. I need the stock market to hold a little longer…

  46. phil commented on Oct 7

    NEITHER WILL 75% of TODAY’S MARKET LEADERS ON THE NASDAQ. SO WHAT? WHAT’S YOUR POINT, EXACTLY?

    ^ if this is the way you invest, i can see why you have such antipathy towards equities. the pain is doled out much slower in RE.

  47. Mark commented on Oct 7

    TWENTY-THREE POSTS in 3 1/2 hours! Man, that has got to be close to a record.

  48. DD commented on Oct 7

    Larry, you don’t think that we live in a time of easy money supported by foreign nations. and if that were to change all credit markets would be effected especially real estate because it seems that most ppl in your industry believe its very localized when credit which is the life blood for your asset class is a global commodity. Lay that on top of the fact that a large part of the u.s. consumer is already tapped out by the fraud that was so easily laid upon them by the media, lending institutions and what not. but that’s not the bigger issue, it really is about the global credit glut and America’s willingness to use it. but hey lets argue about how much or far single family home prices will decline in phoenix arizona or duchess county ny or any other dimwitted suburban or urban city or town in our used and abused nation. americans have been fooled to the extent that our loose fiscal decisions can if not already have easily bring us to the brink. i’m more interested in hearing why this is not or does not have to be the case. the more we can talk about that the less it will become a relevant possibility.

    B, the finicialRX guy called me a retard, that really hurt my feelings…its only 12:30 and i have already started drinking…it is saturday but still….

  49. Larry Nusbaum commented on Oct 7

    phil: I got that stat from William O’Neil’s book.
    “75% of Market Leaders in each cycle were new companies that incorporated in prior then years, 80% paid no dividends, and earning growth was the driver of market leaders, not dividends. Over time, you’ll learn that only 1 or 2 of every 10 stocks you buy will be truly outstanding and capable of doubling or tripling or more in value.”
    WHAT DOES HE KNOW!

  50. Larry Nusbaum commented on Oct 7

    DD: What should people do right this minute?

  51. Larry Nusbaum commented on Oct 7

    The bubble warnings started in 2000, DD.

    “…for now, the frothy buying conditions in some of the nation’s biggest housing markets, especially for high-end-homes, worry economists, who remember how the housing market crashed in the late 1980s after some markets overheated.”

    The Wall Street Journal (bottom of page), March 6, 2000

  52. Leisa commented on Oct 7

    Whoa! Like watching a WWF match!

  53. Larry Nusbaum commented on Oct 7

    Leisa:
    1. I enjoy discussing the so called “housing bubble” without the personal attacks.
    2. I am amused at some people’s obsession with topic. I have no idea why people care so much since they seem to have all sold at the top and are now renting waiting for a 60% drop.
    3. I didn’t know that A-Rod was gay……

  54. phil commented on Oct 7

    “Over time, you’ll learn that only 1 or 2 of every 10 stocks you buy will be truly outstanding and capable of doubling or tripling or more in value.”

    right, right, just like that commercial, “only 10% of stocks will make you rich”.

    Larry are you pals with that Robert Kiyosaki? if so, then it explains everything.

    plz see my previous posts about my friends the insurance salesman and the engineer who are now “real estate developers” in Phoenix, both of whom still can’t seem to grasp what a LTV ratio, DSCR, income statement or balance sheet are. yours and their reasoning is frighteningly similar-

  55. Larry Nusbaum commented on Oct 7

    “TWENTY-THREE POSTS in 3 1/2 hours! Man, that has got to be close to a record.
    Posted by: Mark | Oct 7, 2006 12:29:28 PM”

    Don’t know about you, but I’m getting paid for each one……

  56. DD commented on Oct 7

    that is excellent research…but i do not believe it pertains to the current situation in anyway…since 2000 global imbalances have increaded 10 fold and some point or another it will have to be re-paid overtime at much higher rates…which is a discussion for another time but i think the appearance of higher rates (on the long end, which the fed does not control…you can argue they do not control the short end as well but) it will hurt your real estate market tremeandously…for some time…that out to equalize prices…maybe get rid of some inflation on this…overall is would be really healthy..the longer we keep chugging along like this the worse the payback will be…but inevetable none the less…to answer your question as to what should people do now…is keep living your life the way you want to live it just be aware of your suroundings and the current situation…probably not what you are looking for but i am not getting paid for this….

  57. Larry Nusbaum commented on Oct 7

    “yours and their reasoning is frighteningly similar-”
    As usual, no specifics.

    right, right, just like that commercial, “only 10% of stocks will make you rich”.

    I agree, phil: William O’Neil is one dumb billionaire….

  58. Larry Nusbaum commented on Oct 7

    “to answer your question as to what should people do now…is keep living your life the way you want to live it just be aware of your suroundings and the current situation…probably not what you are looking for but i am not getting paid for this….”

    DD: That’s a pretty damn good answer. And, one’s surroundings is local. One’s situation is personal. Homeowners in Orange County shouldn’t care about the condo glut in Miami….

  59. Mark commented on Oct 7

    “I am amused at some people’s obsession with topic.”

    That’s TWENTY-NINE posts worth of amusement. But it’s the obsession of OTHERS is it? You are slaying me, man. You should do stand-up, you really should.

  60. Larry Nusbaum commented on Oct 7

    Mark: You need that housing bubble to pop! You want that bubble to pop!
    Btw, how’s the commercial market doing where you live? It’s alive & well all over the country. Does that mean it’s heading towards bubble territory?
    Oil is in a bubble? Gold? Wheat? Yankee payroll?

  61. wcw commented on Oct 7

    Larry, I like arguing with you, too, but I find your thesis does not incorporate contrary data (or, as on this thread I am afraid, very much data at all).

    In an attempt to head you off, here are links to a couple posts of mine which are almost all data. I need to update them (current through 06Q1), but I am quite certain current numbers are similar.

    One, here are mortgage payments at current rates on an OFHEO-index home — as percentage of median four-person family income. The data are stark — we haven’t seen numbers this high since 1989.

    Two, here are for-sale-only inventories as percentage of owner-occupied housing. This series is less clear, as it appears in a long-term uptrend. Still, it recently pierced its four-decade two-standard-deviation bands, up.

    Three, here are Fisher & Quayyum writing for the Chicago Fed. They conclude that no obvious factor explains the housing-price runup the last few years, and hypothesize that prices have been driven by new entry into the market via subprime and other creative lending.

    None of these data support your thesis. The second is a curiosity, and the third analysis may contradict the Roubini price-decline one.

    What hard, real numbers do you have for us?

  62. James C. commented on Oct 7

    “larry can’t seem to grasp that a lot of people got extremely levered to get into their homes. you think at a debt to equity ratio of 5:1 you can sail through multiyear decline of singles digits? you think that all those people who barely qualified for an option ARM can just refi into a fixed rate mortgage? think again. just a couple missed payments and your FICO score goes into freefall.”

    A lot of vague claims in this reasoning which provides little real basis for determining what will happen to the housing market going forward.

    “larry can’t seem to grasp” – what value does this serve?

    “A lot of people got extremely levered” – how many relative to the overall number of purchases and at what levels? And once you have this data how is it used to come to any conclusion regarding housing?

    “multiyear decline of singles digits” – isn’t this partly what’s being debated?

    I recall similar back and forth debates in the past about any number of issues. Energy comes to mind, where few anticipated its precipitous rise, let alone to the levels reached. And, of course, when $80 drew near, the talk was of $100 oil, and even higher. But now it’s back below $60 (though pay attention to the faltering discussions with Iran and developments in North Korea) and the $100 discussion has been replaced by the $40 or lower discussion.

    Debates about housing are in the same vein. This is an inherently complex issue that could be influenced by any number of events or developments. Plenty of arguments can be made regardless where it’s heading, but many of these will end up being wrong, others will get some of the details right, and others will be just plain lucky.

  63. eclectic commented on Oct 7

    Larry,

    Your opening on this topic was great. It’s an excellent debate against the stock market/housing bubble question.

    I’d like to add that I’ve never been convinced that there will be a housing crash, per se, in which the values decline and put marginal equity under water with lenders… not that it might not happen, but not so largely as happened in, say, the pre- Great Depression stock bubble with margin loans.

    My thinking is that just a significant slowdown in housing affects so many jobs that the economy would have to face a slow growth period, maybe even a recession… maybe even a severe one like in 1981-82.

    You can keep your house… you can stay solvent… you can live out its value… you can negotiate your debt and cash flow… but you can’t keep the market from putting a 9 – 12 or lower P/E on equities at some time.

    The sooner that happened, the less likely earnings improvements would have time to offset the decline in markets… the longer it takes for that phenomenon (maybe even a P/E or under 9… maybe as low as 6 or 7) the more likely the markets are to have time to produce offsetting returns to counteract declining P/Es.

    Your objective seems to be to defend housing, and yet Barry’s sentiment seems to be to question stock values. Consequently the two of you are in a debate that both of you may win and both of you may lose.

  64. Larry Nusbaum commented on Oct 7

    Mt thesis is that I don’t care. My original post (below) was talking about sentiment, in most markets (excluding condo owners in Florida) makes little difference.

    “Any similarities between home owners and equity investors circa 2000 is strictly intentional:”

    You mean the dirt can go from $400,000 to $4,000 almost overnight?
    Or, that insiders can sell while pumping up the house’s value on TV?
    Or, they can issue more shares in my house?
    Or, the analysts can keep a buy rating on my house, while confessing in private emails that my neighborhood sucks?
    Or, we can be attacked again and they can close the housing market for a week?
    Or, they can cook the books on my Schedule E?
    Or, maybe they could issue title to my house to 7 people at a time?
    How about moving my loan off-shore thus removing it from my personal balance sheet?

    I am sincere in asking why others care so much.

    “Three, here are Fisher & Quayyum writing for the Chicago Fed. They conclude that no obvious factor explains the housing-price runup the last few years, and hypothesize that prices have been driven by new entry into the market via subprime and other creative lending.” – How does one explain the housing run-up since 1997 or since 1940 or since 1930? Probably, demographic & job growth combined with an ever increasing demand.

  65. phil commented on Oct 7

    “William O’Neil is one dumb billionaire….”

    if he has any money, i wouldn’t know or care, it’s from publishing, just like Kiyosaki-

  66. Larry Nusbaum commented on Oct 7

    “One, here are mortgage payments at current rates on an OFHEO-index home — as percentage of median four-person family income. The data are stark — we haven’t seen numbers this high since 1989.”

    LOL: I posted this to my blog this week.You tell me what it means to you________________

  67. Larry Nusbaum commented on Oct 7

    “You can keep your house… you can stay solvent… you can live out its value… you can negotiate your debt and cash flow… but you can’t keep the market from putting a 9 – 12 or lower P/E on equities at some time.”

    I did just that when I bought my San Francisco house at the very top of a market cycle in May 1990 heading into a war, recession and housing maliase. And, I started with negative cash-flow. WITH NO INTENTIONS TO SELL…………

  68. Larry Nusbaum commented on Oct 7

    “Three, here are Fisher & Quayyum writing for the Chicago Fed. They conclude that no obvious factor explains the housing-price runup the last few years, and hypothesize that prices have been driven by new entry into the market via subprime and other creative lending.”
    Based on my last post, these same exact question could have been raised (and probably were) when I bought that SF house at what was the ridiculous price of $325,000 in 1990. And, in San Francisco, people were getting I/O loans, Option ARMs and 40-year loans in order to qualify.

  69. ari5000 commented on Oct 7

    Wow — what a debate.

    I have a theory about real estate and stocks — why they are doing so well. It’s nothing ground-breaking… It’s just DEBT. It’s all about debt.

    Consumers are driving the economy and they didn’t stop buying — contrary to the bears thesis — because of debt.

    The housing market is great – because of risky loans putting people in debt.

    The government fueled the economy by growing an enormous debt. What’s the current bill now: $8.6 trillion.

    I believe the enormous debt racked up by EVERYONE in every facet of the U.S. is simply being discounted to zero. It’s a problem for the future, after all, and most people are hopeful about the future — or at least — they’re willing to overlook future problems as long as things are good today.

    Can anyone explain to me how the U.S. will pay back all the debt? I assume the answer is — we won’t. I mean, we’ll always carry an enormous debt that grows in relation to GDP.

    I’m sure 95% of the readers here have read “Fooled By Randomness”. There is a minuscule chance that one day — (not tomorrow, of course) there will be a day of reckoning. This is what keeps the Gold Bugs smiling through the current difficult times. How does reckoning with Debt finally hit investor psychology? Or can it be pushed aside forever with re-fi’s and zero-percent financing (for 10 years!)

    Everything will always be a bull market as long as nobody has to pay the bills. I will sell everything if it ever comes into the media that the bills can’t be paid by consumers or the government. But I’ve never ever seen this issue discussed except on this blog.

    And nobody takes it seriously.

  70. Mark commented on Oct 7

    Larry said:

    “Mark:You need that housing bubble to pop! You want that bubble to pop!
    Btw, how’s the commercial market doing where you live?”

    Before early retirement, I was the director of an international commercial real estate and economic development consulting company. We assisted on projects in 43 countries and 38 of the 50 states. Commercial real estate in my area is doing very well although finding suitable large parcels for the type of mixed use projects I usually assist with has been very difficult for the developers. Entitling them has been difficult as well. Thanks for asking. If you have any other questions about markets, domestic or international, please let me know.

  71. Mike commented on Oct 7

    “I don’t have any “issue”. I make no predictions on housing. I could care less.”

    Larry, your 33 posts of the 66 in this thread seem to indicate that you couldn’t care more.

  72. Larry Nusbaum commented on Oct 7

    Mark: Can you tell us readers the day, or at least the month the housing bubble pops…..thanks, in advance.

  73. wcw commented on Oct 7

    If your thesis is that you don’t care, why are you posting here? I know why Mr. Ritholtz is posting: it’s because housing prices affect consumer spending, especially the last few years, and because consumption is 70% of GDP. Now, consumption growth is trending down lately, which if continued will pressure GDP. If there will be poor production results coming in, we who make active investment decisions care, whether we invest in residential housing or equities or bonds or options or, well, anything except for stuffing our cash in the mattress.

    You might want to read the things to which I link, especially the FQ paper, which quantifies in exhausting detail that the current runup is qualitatively different from any previous one.

    If you want to link to your view of the housing data on your site, please do. I’ve sent you five links to real economic data or analysis thus far. The only one of yours I clicked was a stock chart.

  74. Larry Nusbaum commented on Oct 7

    No, Mike, it means I’ll stay and take the heat. Read my posts to see how little I care about a “hosuing bubble”. I do not work in the housing market as a developer or as a realtor, so it’s easy to say I don’t care. But, I do care about two things: I don’t want to see people panic into doing anything nor do I want to see people get hurt financially. That’s what i live for.

  75. Larry Nusbaum commented on Oct 7

    wcw: What do you want people do do with all of this data? Sell their homes and rent? Buy gold? Payoff their house? Climb a wall of worry?
    Let’s say you are 100% right? Should people spend their way out of debt or borrow more or move to Mexico?

  76. winjr commented on Oct 7

    Nusbaum, your take on the blogger’s original post completely missed the point.

    1) The vast majority of homeowners think their equity will rise in the next few years, when an objective analysis of the data suggests otherwise.

    compared to:

    2) The vast majority of equity investors in the year 2000 thought the value of their 401(k)’s would rise in the next few years, when an objective analysis of the data would have suggested otherwise.

    It’s a valid and spot-on comparison.

  77. wcw commented on Oct 7

    I want people to act just like you, Larry. If people do not care to look at the data, in the aggregate they will make more uninformed trades in the markets. The more uninformed traders in the markets, the more likely I shall be able to find opportunity. However, I both enjoy a good argument and I feel it worthwhile to test my ideas against contrary views. The better tested my ideas, the more likely I can be an informed trader, and not an uninformed one who deludes himself.

    As a result, what I’d like from you and any other interlocutor are considered and logical disagreements. I sympathize with your desire merely to argue, but it doesn’t do much for me without the data or logic. You could, for example, have posted the link to your consideration of the data on your blog. Why didn’t you?

  78. Mark commented on Oct 7

    “Mark: Can you tell us readers the day, or at least the month the housing bubble pops…..thanks, in advance.”

    Never said there was a housing bubble, my friend. Haven’t posted one word on it in this thread. But I appreciate you thinking so highly of my opinion that you’ve asked for it. I guess I’d be more qualified to speak of commercial real estate in that regard. As I’ve told others here, that party certainly has not ended.

    Best,

  79. Vega commented on Oct 7

    Overheard in a Pamplona bar, sometime in the summer of 1924:

    “How did you go bankrupt?” Bill asked.

    “Two ways,” Mike said. “Gradually and then suddenly.”

    “What brought it on?”

    “Friends,” said Mike. “I had a lot of friends. False friends. Then I had creditors, too. Probably more creditors than anybody in England.”

    –E.H., TSAR

  80. diva commented on Oct 7

    Larry Nusbaum
    I basically agree with you. Why people can’t understand that the 97 tax law change jumped up properties values by a large step function….. I will never understand.
    oh well
    Their loss.
    (and the current Fed induced slow down in home value increases will be short-lived)
    Tis a chance for all the folks who have not already gotten in to get in……. after missing 85% of the move.
    Or….. they can miss this opportunity too.
    oh well

  81. wcw commented on Oct 7

    Quite true. Taxes are the one and only reason to own your residence at current prices. Last summer, after an argument with my father, I modeled housing + tax breaks vs renting and investing, at San Francisco price. Where I expected a slam dunk for renting, due to the influence of tax laws, owning even at current prices beats renting about 1/3 of the time. That’s pretty impressive when the condo version of what I rent for $2k/mo. costs ~$750k.

    Tax laws can change, of course. The moment they cap the interest deduction (a-la the Bush panel), that very moment your 1/3 turns into 1/Very-Large-Number.

    I am a happy renter — but then, San Francisco is rent-controlled and my landlord is really great.

  82. Cherry commented on Oct 7

    Democrats are bad news for the housing market generally, because they are not fans of the Real Estate business.

    My guess if the Neo-Cons are shoved out, you will see another tech explosion as that debt is helped poored back into Tech through Donkey policies while Real Estate plummets, creating a short but signifigent recession…………unless the global system breaks down(the hidden golden bear lol) and that debt implodes the economy.

  83. diva commented on Oct 7

    wcw – I hope you put the TAX FREE cap gains (that you could take every two years) into your calculation…. or you are missing a major benefit of owning vs renting.

    just an fyi, its your money.

  84. jj commented on Oct 7

    Former Federal Reserve Chairman Alan Greenspan said the “worst may well be over” for the U.S. housing industry that’s suffering its worst downturn in more than a decade.

    Greenspan, speaking at a conference in Calgary today, pointed to a “flattening out” of weekly mortgage applications after they went down “very dramatically.”

    A longer and deeper U.S. housing slump may reduce consumer spending enough to push the economy into recession, some forecasters warn. Greenspan’s comments may represent a more sanguine view than his successor, Ben S. Bernanke, who said two days ago in Washington that the market is in a “substantial correction” that will lop about a percentage point off economic growth in the second half and restrain the expansion next year.

    Fed Vice Chairman Donald Kohn, a former top adviser to Greenspan, also said this week that while he doesn’t know how long and deep the housing slump will be, it probably won’t sink the U.S. economy into a recession

  85. Larry Nusbaum commented on Oct 7

    “I want people to act just like you, Larry. The more uninformed traders in the markets, the more likely I shall be able to find opportunity.. Posted by: wcw | Oct 7, 2006 2:29:35 PM”

    THEY ARE, BY DOING VERY LITTLE. BUT, WELL SAID BY A RENTER! LMAO!

  86. christopherrobin commented on Oct 7

    who is Larry Nusbaum ? Never really heard of him before this Blog …. Mr. Nusbaum do you have a blog or something ?

  87. Larry Nusbaum commented on Oct 7

    My “advice” for most is to do nothing and relax and tune out the noise. Because, the opposite if that is to panic or even worse: Become a renter.

  88. Larry Nusbaum commented on Oct 7

    I never see practical advice from the bubble campers. Just more dire gloom & doom.
    Daily: “More evidence that housing is cooling”.
    Yeah, it’s been “cooling” for 3 years now. Someday, they have to be right.

  89. jcf commented on Oct 7

    Wow. I remember some of the old Errol Flynn derring-do films where he held off six swordsmen single-handed, a cocky smile on his face. He was a creampuff compared to Larry, with a nod to Diva for some belated backup. Regardless of one’s opinion, you are one stand-up guy, L.
    I’m ambivalent: resale res RE with good location will overcome current “sentiment” fairly well. a dip and a bounceback in a couple of years to new highs. It’s the new homes way out there in marginal areas with the one-hour-one-way commutes that will suffer more, while the homebuilders consolidate and plan for the next bull run.

  90. Larry Nusbaum commented on Oct 7

    TY, jcf. I have been at it for 20 years, in all aspects of real estate. And, you are 100% right on the homebuilders, which represent 15% of the housing market. Just 15%……….

  91. mike commented on Oct 7

    Mr Nusbaum: you said: “or even worse: become a renter.” Well sir, I resemble that remark; my simple, serious question to you is: should I purchase a home in San Diego now? (I can afford it) but my question refers to timing: is today “good timing?” Or do you not consider timing relevant in such purchases? I think that was related to the original post. I’ll check back for your sincere answer to this simple inquiry. Thank you.

  92. Larry Nusbaum commented on Oct 7

    No, mike. On balance, I would not buy a SFR in SD at this moment in time. If you are buying one to live in, you can afford to shop/wait. I am very worried about Southern California (San Diego & Orange County).
    But, my overriding pint is that if you do buy a SFR righ now, the price you pay won’t matter 7-10 years from now. In fact, you will look back in amazement at how well that “investment” did.
    Now, this is very different thinking than if you own one or more houses in which I would not suggest selling.

  93. mike commented on Oct 7

    Larry, thanks for your thoughts.

  94. Larry Nusbaum commented on Oct 7

    mike: do your homework and “pick-off” a desperate seller when you are ready and make them come to you.
    The Yankees are wonderful, btw.

  95. Larry Nusbaum commented on Oct 7

    Democrats are bad news for the housing market generally, because they are not fans of the Real Estate business.
    Posted by: Cherry | Oct 7, 2006 4:49:01 PM

    Wrong! Clinton was responsible for signing into law the $500,000 cap gain exclusion on the sale of one’s primary residence which marked the beginning of the greatest hosuing boom in history. (May, 1997)
    Talk now, under Bush and the republican congress is to repeal that and/or eliminate the deduction for home mortgage interest. So there!

  96. winjr commented on Oct 8

    “Daily: “More evidence that housing is cooling”.
    Yeah, it’s been “cooling” for 3 years now. Someday, they have to be right.”

    I’m calling BS on you, Nusbaum. Show me just one source, published before 09/05. claiming that the housing market was “cooling”. Provide a link.

  97. Gary commented on Oct 8

    Just a little real life experience. My father finaly sold his house in KC MO. after 9 months on the market. He lowered the price several times just to get anybody to come look at the house. The house was completely remodeled and spotless. He priced the house to match appraisal values of similar houses in the area. Bottom line he had to lower his price by 26% to sell. Doesn’t sound like any soft landing I ever heard of.

  98. DD commented on Oct 8

    larry btw you didnt need 38(000,000.00) to tell the ppl that real estate would be higher in 7 yrs.

  99. whipsaw commented on Oct 8

    Larry-

    It appears that you posted here continually for nearly 15 hours- is that fear or what? Consider developing a hobby.

  100. Cherry commented on Oct 8

    Larry, that was Bill Clinton with a Republican Congress trying to stoke that through. Get Democrats in Congress, they won’t be so nice and it certainly WILL be appealed.

  101. Eclectic commented on Oct 8

    Hey BR… I think you’ve been Blog-jacked!

  102. Eclectic commented on Oct 8

    Listen, folks… isn’t it about time to put this one to sleep?

    I mean… Dear merciful God!… Nuss is bound to be in need of resupply by now. Let the poor man get some food, water and medical supplies. Have a heart!

  103. Mark commented on Oct 8

    “who is Larry Nusbaum ? Never really heard of him before this Blog …. Mr. Nusbaum do you have a blog or something ?

    Posted by: christopherrobin | Oct 7, 2006 7:09:20 PM

    No, christoph., I don’t.

    Posted by: Larry Nusbaum | Oct 7, 2006 7:28:16 PM”

    Then what the hell is this, Larry?

    http://millionairenowbook.blogspot.com/

    The top banner says it’s a blog. ( “This blog will: 1. Help you organize and simplify your financial life…”) Sure looks like a blog. Has your name on it too. Even has your picture. You pasted the address on other blog entries in other blogs. You have even linked to your book in other blog comments at other sites. That is, unless there are two Larry Nusbaum’s of Phoenix, AZ out there carrying on serial posting campaigns on the issue of the housing bubble.

    I think Eclectic has it right. I think Barry has been blog-jacked. For what purpose I can only speculate since the blog-jacker has a blog of his own.

  104. christopherrobin commented on Oct 8

    Mark, why did Larry lie to me ? I checked out that Blog.

    Chris

  105. christopherrobin commented on Oct 8

    Mr.Nausbaum, Would you care to comment on this comment below from your blog :

    “”First, you should buy gold in the physical form, that you can hold in your hand, in increasing amounts as the road to catastrophe we are now on stretches farther into the future.””

    I mean that sounds like we are deeper into panic territory. Your sentiment sounds pretty bleak. What catastrophe is looming. Will all assets classes correct in a violent manner ?

    Chris

  106. alexd commented on Oct 8

    Why do you guys make me stand next to the elephant in the room that no one talks about, again and again.

    When I was a student in PA. I went to a place called the Alvathorpe Manor to look at his incredible print collection. He bought these pieces of art during the great depression. He bought them cheaply. they have all been donated to the public. Thank you Mr Alvathorpe. (You folks are always talking talking about buying / renting. Guess what ? We are all renting!

    I see several scenerios. Housing goes to crap. Then you buy housing. Stocks go to crap, you then buy the cheapest stocks of companies that provide indispensible goods and services. The dollar goes to crap, you buy what is moving opposite the dollar. (commodities that are used but where access is getting rarer). the questio is how do we attain enough liquidity at any given point to take advantage of a good situation?

    If you look at Wired magazine you will see that the army has cut a couple of contracts with a company that for a reasonable price can derive potable water out of the air, in varying climates including the dessert. Anyone else here thinks that is important?

    Kurzweill talks about the singularity. A major point where technology/information reaches a critical point and the world changes so much that we simply cannot imagine what the world will be like since by it’s nature it will be beyond us? Care to bet on that? (You know you cannot).

    Real estate: buy valuable property which is likely to increase in value in your lifetime. Location,location, location. The point of the boom/bust cycle in real estate or anything else is that a rising tide lifts all boats. But no one makes us buy just any boat. Look for value in things, or in a mania try to get a chunk out of the middle.

    Take care of yourself be as healthy in all things as you can be. Loose that an d all the money in the world is all the money in the world.

    Remind me periodicly to do the above because just like you I sometimes forget.

    Be well.

  107. MarkDee commented on Oct 8

    Larry is a troll. I have seen him on many of the housing bubble blogs trolling and flaming in this same manner in order to drive traffic to his site.

  108. Larry Nusbaum commented on Oct 8

    “Mark, why did Larry lie to me ? I checked out that Blog. Posted by: christopherrobin | Oct 8, 2006 8:40:11 AM” Mr.Nusbaum, Would you care to comment on this comment below from your blog :
    “First, you should buy gold in the physical form, that you can hold in your hand, in increasing amounts as the road to catastrophe we are now on stretches farther into the future.”

    3-5%! FOR DIVERSIFICATION (ASSET ALLOCATION). I LIED BECAUSE I KBEW YOU WOULDN’T UNDERSTAND THIS AND YOU PROVED ME RIGHT. THANKS. NO MORE THAN 3-5% IN THE PHYSICAL. A BLOG WHERE I DISCUSS ALL THINGS FINANCIAL, INCLUDING COMMODITIES WHICH INCLUDE PRECIOUS METALS. NOT A IDIOTIC REAL ESTATE BUBBLE BLOG, NOR A REAL ESTATE CHEERLEADING BLOG NOR A GOLD BUG BLOG. I KNOW, THAT’S ALL OVER YOUR HEAD. BUT, THANKS FOR PLAYING AND GET A COOKIE ON TH WAY OUT.

    MarkDee: You’ve seen me on other housing bubble blogs and didn’t like it because it’s where you renters live in your world of anger and jealousy. I totally understand.

  109. Barry Ritholtz commented on Oct 8

    At what point should I close this off before it devolves further?

    Or, is it worth leaving open, so we can watch the car crash in real time?

  110. Ben commented on Oct 8

    If this were the Gong Show, I’d say right about now…

  111. ~ Nona commented on Oct 8

    Barry, you can close this after Zephyr tells me why he’s buying 10 Year Treasuries instead of waiting a big longer and buying good dividend-paying stocks.

    I think most of us here expect a market correction; some of us (my hand is up) are substantially in cash and/or very short-term bond funds…waiting.

    But maybe Zephyr is right: rates will come down further, so he’s buying bonds, not equities. I’d love to know his thinking.

    And a PS to Zephyr: If you have a chance, thanks for your reply.

  112. Mark commented on Oct 8

    Barry-

    I think we should allow The Big Picture blog’s Diplomat of the Year, the inimitable “B”, to administer the final rites to this. Seems like a case for his delicate handling. If you could loosen editorial and content standards a wee bit –at least for one or two posts– perhaps he can be induced to perform hus services.

  113. Larry Nusbaum commented on Oct 8

    “Daily: “More evidence that housing is cooling”.
    Yeah, it’s been “cooling” for 3 years now. Someday, they have to be right.”
    I’m calling BS on you, Nusbaum. Show me just one source, published before 09/05. claiming that the housing market was “cooling”. Provide a link.

    Posted by: winjr | Oct 8, 2006 12:53:40 AM

    1. http://millionairenowbook.blogspot.com/2006/07/is-there-bubble-in-real-estate-bubble.html

    2. “…for now, the frothy buying conditions in some of the nation’s biggest housing markets, especially for high-end-homes, worry economists, who remember how the housing market crashed in the late 1980s after some markets overheated.”

    The Wall Street Journal (bottom of page), March 6, 2000 http://www.realestatejournal.com/buysell/markettrends/20050531-gongloff.html

  114. BDG123 commented on Oct 8

    Sheesh. Barry, what the hell is going on here?

  115. Charles commented on Oct 8

    1. http://millionairenowbook.blogspot.com/2006/07/is-there-bubble-in-real-estate-bubble.html

    2. “…for now, the frothy buying conditions in some of the nation’s biggest housing markets, especially for high-end-homes, worry economists, who remember how the housing market crashed in the late 1980s after some markets overheated.”

    The Wall Street Journal (bottom of page), March 6, 2000 http://www.realestatejournal.com/buysell/markettrends/20050531-gongloff.html

    now that’s some intense research, linking old articles.

    hey Larry, is your entire family as insane as you? next time you decide to skip your meds do us all a favor and go very far away from a computer-

  116. wcw commented on Oct 8

    Diva, thanks for your concern for my modeling skills. Short answer: yes. If not for the cap-gains exclusion, and had I not assumed full terminal payment of gains taxes on investments rather than stepup basis or some other exclusion, then buying in SF does not beat renting even 1/3 of the time.

    Does anyone move every other year to maximize their exclusion?

  117. eli commented on Oct 8

    I think now would be a good time to post a link to “Troll (Internet)” on Wikipedia:

    http://en.wikipedia.org/wiki/Internet_troll

    Please, do not feed the troll. It can be hard to determine if Larry is a Troll. From the entry, “It can sometimes be difficult to distinguish between a user who merely has different values, views, or ideas, and a user who is intentionally trolling.”

    Personally, I place Larry in the “Attention-Seeking Troll” category. Excerpt:

    “Intentionally posting an outrageous argument, deliberately constructed around a fundamental but obfuscated flaw or error. Often the poster will become defensive when the argument is refuted, and may continue the thread through the use of further flawed arguments; this is referred to as ‘feeding’ the troll.”

    Though, I might suggest that many who engage Larry are simply Trollbaiters. You are the troll’s fuel. Without you, the attention troll is dead. Then entire discussion is lost. YHBT. YHL. HAND. (see the article for clarification)

    Please, do not feed the trolls.

    eli

  118. eli commented on Oct 8

    Here is a linkified link for those too lazy to copy/past:

    Internet Troll

  119. MrMarket commented on Oct 8

    The lady doth protest too much, methinks.

    ;-)

  120. Zephyr commented on Oct 8

    Nona,

    You asked why I am buying 10 yr Treasury bonds instead of waiting and buying dividend-paying stocks.

    The reasoning is simple: I expect a slowing economy with declining inflation, and thus a decline in the risk-free interest rates. This will cause price gains for Treasury bonds.

    I also expect risk premiums to increase. Therefore junk bonds and other sources of interest or dividends will move toward increasing yields with declining prices for a while (18 months?).

    I also am concerned that stock prices may generally decline for a while so I am selling into this high stock market.

    So basically, I am looking to dodge expected price declines. However, I expect treasury bonds to have some price gains while paying a modest but steady income. So a few months ago I started moving some money in that direction. It is a safe parking place while I wait for the next inflection point in the cycle. I suppose you could call it a flight to safety.

  121. Jarrod commented on Oct 8

    cycles, cycles, cycles people. Seriously, im confused who thinks what but bottom line, people cant continue to afford the 5% appreciation. I know what Barry feels and I cant agree with him more! I worked in the mtg industry and people cant afford the rising house prices. One curve ball and it’s “curtains, rocky….curtains!”. Shit out of luck. Especially these stated, 100%ltv, 52%debt ratio(on a good day). PEOPLE LIVE REFI TO REFI, NOT CHECK TO CHECK ANYMORE. Look at RE/Housing in the past. Cyclical, nobody can refute that, period. Those who ignore history are doomed to repeat it. No brainer people.

  122. ~Nona commented on Oct 9

    Zephyr, thank you for giving me — and all of us
    — your reasoning.

  123. Ethan commented on Oct 9

    Diva:

    Way back up you suggested that wcw should include in his owning vs. renting calculation the tax free capital gain on sale of a home one has lived in for at least two years.

    That implies that you think owners should move every two years or so. Which in turn implies 5% +/- selling commission, moving costs, redecorating costs, time away from work, frustration, etc. etc. Even without giving $$ value to ones own time and effort, I doubt the tax free capital gain in only two years can cover the entire cost of moving so frequently.

    The result, I suspect, is that the renting vs. owning debate on this thread assumes some rather longer stay in an owned home. Logically so, I might add. My son, for example, has been a home owner for about 7-8 years, while my grand son (just starting college) is renting.

    Do you have any suggestions for wcw’s recalculation of the rent vs. own comparison using your tax idea plus the other associated economic and non-economic costs?

    Ethan

  124. Alex commented on Oct 9

    I agree with Jarrod. Look at Japan in the 90’s, Hong Kong in the late 90’s, UK and Australia in the last 10 years. Real estate can be cyclical. The extreme example – real estate value in Hong Kong dropped close to 60% within 2 years when the bubble burst. I am not saying the same will happen in US but to think it will not happen because it never happen before is a bit naive.

    Btw, I am an expat and did not plan to participart in real estate market

  125. The Theroxylandr in Flame commented on Oct 10

    Real estate bubble: why the worst is still ahead

    Any bubble, including Nasdaq bubble of 2000, when the index lost 78% of its value after the bubble burst, follow the same psychological pattern of participants, i.e. bubble inflators. This pattern is:

    euphoria
    denial
    recognition
    panic
    hope (optional)

Read this next.

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