Shiller: “Historic Housing Bust”

Shiller warns about the extent of the Housing collapse:

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  1. Daniel Halvarsson commented on Feb 5

    Schiller, right on the spot on housing, but still a Keynsian when it comes to consumer spending as a driver of the economy. Yes people will stop spending — the more the marrier. Less consumption means more savings and investment which, if any can cuchin the comming collaps of the american economy.

  2. jombi commented on Feb 5

    As an engineer, I find the common solution that these clowns promote as laughable at best (spend more) … However, given what’s at stake, I can’t laugh….. I really can’t… In fact, I am having trouble sleeping. In fact, I can’t focus on my discipline.

    Confidence a’? Yeah, have confidence everything is alright when you assess your financial situation and realize you will be a slave to your debt for the rest of your life… Go out their and spend and have confidence everything will be alright. Have confidence when inflation and taxation effectively take away 50% of your income and it used to line some private company’s pockets and the barrel of a gun with hot lead thousands of miles away…. Be confident everything will be o.k? Are you ____ kidding me?

    This is one video that made me say “WTF” and I have been saying a whole lot of WTFs since I graduated and hit the ‘real’ world…

    As a 23 year old newly out of college w/ a Masters in ECE, I have had to take focus off of what I spent many years pursuing with passion (something which I dreamed about as a child) in order to figure out how to survive this coming wave of bullshit that is about to be dumped on my lap (America’s economic future)….

    Friends said to get off the political belt and invest… F’ everyone else. So, I did.. I made some nice change taking market positions in a little short/long her on ABK, MBI.. Some SKF to cheer in the new year. A little shorts on retailers… The gambit…

    But when I woke in the morning @ 4/5 a.m (PST) in order to make some change ahead of the workday to offset the ridiculous state taxes, federal taxes, sales taxes, gasoline tax, inflation……..You name it… When I stayed up all night on Sunday marking out stock picks… Looking into 0% APR BT credit card offers to shore up $25k so I can trade like a free human being…. When I laid exhausted and covered my finances after having brought in ~120k from my start date… I couldn’t help but ask, So this is the American dream? So this is Middle Class?

    A paid off civic, ~$16k in my 401k, living frugal, sleeping on a mattress pad… Living modes… So this is the American dream? ~47% of my income stripped off by taxes alone?

    Paying a social security and medicaid bill that I will never benefit from? Living amongst a nation of folks who applaud being slaves to debt and dependents on the government for handouts?

    And I had epiphany… This is not the most efficient means to solve my financial woes nor is it the efficient means for anyone….

    As an engineer, I wouldn’t accept the solution to a leaky gasoline tank as putting more gas in the tank.. So, why am I sitting by as an empowered educated citizen watching my money go to doing that? Just WTF is wrong w/ me?

    I have officially decided today 2/5/2008 that I am going to make my voice heard and the voices of those heard so that we wont have to sit by helpless as we let a flawed govt. and economic system bleed our continuing efforts to better ourselves dry…
    To the government, I say :
    I don’t want your fucking handouts or bailouts… Give me back my freedom and my ability to be empowered and you can take your worthless paper and beat it !!!!

    So, I ask this group…. Am I off base? Am I justified in feeling this way? Am I justified in taking a stand?

  3. bobd commented on Feb 5

    Jombi, we live in a country of people who sell out. When you find yourself standing alone it is then when you must make your second choice, to sit or be shit on. Good Luck Grasshopper.

  4. Steelduck commented on Feb 5

    If we consider how much more tame BR’s comments are on TV compared to his blog views, one may imagine what Mr. Shiller would say on his blog.

    Reassuring he is not. Mr Shiller is not only mentioning the “R” word, he is talking “D” word.

    Looks like we may want to take a closer look at those 1987, 1929 charts.

  5. Justin commented on Feb 5

    jombi, “Except those things I cannot change and the wisdom to know the difference.” The system isn’t broken just getting terribly bent. Now if the dam Keynesians would just get out of the way and let the Mercantilist stop buying our bonds to correct this thing the way it is suppose to be corrected – by servival of the fittest. Obviously, America needs a real wake-up call; AGAIN.

  6. blam commented on Feb 5

    “If people remember, at the start of the great depression, there was a huge drop in confidence”. I don’t think we are going into a depression. Luckily we have Ben Bernanke, an expert on the great depression, leading us.
    Housing bust of historic proportions… worse than the bust of the great depression…will go down in history as the sub-prime housing bust…. $2Trillion in losses allready ….. we can expect it to go on for at least another year.

    Thankfully Dr. Shiller pulled his punches.

  7. Aunt Deb commented on Feb 5

    Although Mr. Shiller says we have an equality problem which we should be thinking about all the time, he seems to spend no further time on it in this interview. Is he really endorsing the bailout in its current form?

  8. Steelduck commented on Feb 5

    Instant replay:

    One the one hand Dr Shiller goes: “Luckily we have Mr Bernanke at the helm”, and on the other hand he says “Cutting rates does not… heeeu… this misalignment is not going to be stopped by the Fed”.

    Way to go Dr. Shiller. You get a B+ for saying what you mean without actually saying it.

  9. Andy Tabbo commented on Feb 5

    That is a very sobering interview. I’ve seen Shiller speak many times on TV. This is the first time I’ve heard him say things like “I fear we may be facing a severe recession.” He mentioned the Depression too many times…..

    That was a scary interview.

  10. dark1p commented on Feb 5

    Ah, Jombi. You sound so much like me, 30 years ago. The high tax bite, the high cost of gas, all of it.

    Take some advice: things do not often turn out the way you think they will. The Social Security and Medicare you pay today will likely be there for you, and you may be glad it is. 30 years ago, I was convinced that SS and Medicare would be belly-up by now, that I would have wasted all of that money, that I could invest it better and retire rich and take care of myself.

    Guess what? I’ve made some mistakes, some bad investments (who would have thought?), and I’m still working with not anywhere as much to retire on as I thought. The SS doom sayers have been around forever. That will be taken care of, if some idiot doesn’t screw it up because it’s a ‘crisis’ (hi, Obama, how ya doin’?).

    Medicare seems tougher, but that will also get worked out. Probably because the entire medical system will be overhauled, a bit at a time. It’s broken badly, the costs are out of control, it just can’t sustain itself much longer.

    You have the anger and frustration that befits your age. The hard part is keeping your mind open enough to understand your future may be dependent on some of the things you curse today.

  11. cinefoz commented on Feb 5

    I just listened to the interview and I am glad I didn’t read the recent crap he wrote about housing. This is a man with a political agenda, someone who wants to use a perpetual housing scare scenario to further it.

    I never heard him give a direct answer to a direct question. Not once. When asked if the big price run up, followed by the recent downturn was only a correction to normality, he blathered on about it not being like the Depression, but the Depression must be used for comparison. What a phony shitstorm.

    He is playing on the need for people to think experts exist who really know it all. And if bad things happened, you can surely extrapolate and continue the trend line in the same direction for all time.

    He also only used 10 or 20 markets as basis for his graphs. Had he used my community, he would have only seen a longer time on the market with only slight price changes. Not the end of the world he IMPLIED constantly.

    “Today is Bad and tomorrow will be the same or worse. DEPRESSION, DEPRESSION, DEPRESSION, BOO BOO BOO, but not really” said Shiller who then repeated himself several times without providing a direct answer to even one question that contradicted his agenda.

    I proudly repeat my belief that housing will turn upwards later this year, probably in late spring or summer. To the idiots who can’t read simple English, I do not mean that housing prices will be off to the races again. Rather, I think this will mark the inflection point to normalcy again.

    If you went stupid and paid 50% or 100% too much for a California or similar house at the top of the mania, too bad. You lose and what I said doesn’t apply to you. Fortunately most people are not involved with subprime or insanely overpriced homes. Every successful economy has winners and losers. People who buy at the top of manias are generally losers.

  12. Francois commented on Feb 5

    “I proudly repeat my belief that housing will turn upwards later this year, probably in late spring or summer.”

    You mean that housing will become affordable again, and that the credit tightening unfolding right now will be stopped in its tracks?

    Somehow, I find this hard to believe. Unless you’re thinking about spring or summer 2010…at the earliest.

  13. cinefoz commented on Feb 5

    Francois,

    Please refer to the paragraph that refers to idiots who can’t read simple English.

  14. Shane commented on Feb 5

    jombi,
    I personally feel that you are definitely justified. While my situation is a little different, I’m 28, working for three years-I’m currently working on a Masters in ECE, married with a kid on the way, living in one of highest cost of living places in the US. I do feel a lot of your same sentiments. I think having an engineering background gives me a different perspective on things.

    I think what gives younger folks-more accurately those just starting to work (not trying to start age warfare here) a different perspective is not being institutionalized in the system. After so many years of being in the system, people become complacent at being screwed over all the time. It’s very similar to what I found as an undergrad and TAs (who were sometimes the worst at giving good grades) . . . it was as if they were saying, “well we’ve been screwed over, so now it’s your turn to get screwed over”. So instead of doing what is morally right, they force morality on everyone else.

    For example, when on God’s green earth did it become morally right to forcibly take one man’s earnings and give it to another (from each according to his abilities to each according to his needs-Marx). And before any rails against me for being uncharitable, I give at least 12% of my income to charity.

    I try to be very principled, life in my opinion isn’t about getting ahead, it’s about doing what’s right no matter the consequences.

    It’s very enlightening the same platitudes that politicians espouse today are the same ones we’ve had for 30+ years. Look at some YouTube campaign ads from the 70-80s. It is the same stuff you hear today, change this, change that, cut gov. debt, save SS, blah blah blah. So far very little has changed course . . . (i.e. from a free society to a socialized/fascist one). So while politicians espouse change, and washington is broken, etc, etc. I’m of the opinion very little will actually change-except for more government regulation, more socialized programs, more debt, and less personal responsibility.

    Say what you will, but in the times when the opportunity for real change comes (not trying to get too political), like Perot or Paul, the masses really don’t want it-they’re institutionalized in the system. So we get the same old solutions to the same old problems, and nothing fundamentally changes. There are ebbs (Reagan) and flows (FDR, and Johnson), but the trajectory doesn’t change it either speeds up or slows down.

    As far as investing in stocks, I personally like commodities more, but I really don’t do a whole lot of investing in it. I save my money and try and put it in the highest yield savings account, I know I lose some on inflation, but I accept it. I know I could prob. do better in the markets, but I have learned a couple of things from my father (who for years worked commodities, and actually became quite good at it, he actually holds a seat on the COMEX).
    1) Don’t play with money your not willing to lose (this includes “investing” in stocks)-it clouds your judgement
    2) You need a decent amount of cash in order to play the game right (at least 25k)
    3) It takes a lot of time to do it right-one hour a day just doesn’t cut it
    4) Nobody cares more about your money then you.
    5) But at the same time you have to learn to completely control your emotions.

    Sure I could give my money to a money market or mutual funds . . . I’m just protective of my money, and I like to make the decisions in where it goes, it’s just my personal choice.

    Since, I don’t have 25k I’m willing to lose at this point (baby, working on buying a house, etc). I mostly stay out of the game.

    dark1p . . . 30 years ago that would have put us in the midst of the 70s . . . yes things would have been horrible if things didn’t start to correct somewhat.

    I personally believe the biggest difference now that will change the world is information. With the click of a button, a high school kid can research on his own and find out how much BS he is learning in school-that is very powerful.

  15. Lew Dunbar commented on Feb 5

    Jombi,

    A paid off Civic and $16k seems good to me for 23. Heck, I am 37 and have a paid off Corrolla and $20k. Ron Paul’s politics need serious consideration as remedies for your grievances.

  16. cinefoz commented on Feb 5

    Incidentally, most people ignore the fact there are two sides to every trade.

    If some idiot paid 100% too much for a house, that means the lucky stiff who sold the home received a bonanza. Screaming finance babies may have been left holding the bag due to extreme incompetence in their profession, but the money didn’t evaporate. Some people are sitting pretty for selling their homes to idiots who believed there was no limit to up. Crooks who sold homes with phony appraisals have cash flowing within the economy somewhere.

  17. Mr. Obvious commented on Feb 5

    cinefoz….I used to find some merit in your posts…but no longer. If you are so right, then why so angry?

  18. bonghiteric commented on Feb 5

    Cinefoz,
    Could you please define “inflection point to normalcy”?

  19. Doug Watts commented on Feb 5

    Some people are sitting pretty for selling their homes to idiots who believed there was no limit to up.

    Are you sure? I don’t see how this works. If the house is foreclosed, the payments stop. If the house cannot be re-sold for its original sale value, that value is illusory. It no longer exists. The wealth disappears as quickly as it first appeared.

  20. michael schumacher commented on Feb 5

    Yes Please in your infinite wisdom cinedouche, please explain that made up phrase. While your at you still have several points to clear up with interest rates (the fact that you can’t understand them) and how that is supposed to save the housing market.

    Good luck getting ANYTHING coherent or he’ll just call you a name and feel good about it.

    Ciao
    MS

  21. Maggy commented on Feb 5

    I sold my house in October of 2005
    for more money than I thought i could ever get for it. I can re-buy that house right now if I wanted to for about the same amount I paid for it in 1993. That is what he means.

  22. Bob A commented on Feb 5

    Encouraged by who? Remember this phrase? “I wanna make this the ownership presidency”

  23. Doug Watts commented on Feb 5

    Maggy, agreed. However, there are few too few of you out there in the market to keep the bubble from imploding and getting goo all over everyone else.

  24. Northern Observer commented on Feb 5

    So, I ask this group…. Am I off base? Am I justified in feeling this way? Am I justified in taking a stand?
    Posted by: jombi | Feb 5, 2008 5:44:47 AM

    One of the hardest things to accept is how linked you are to your fellow man, in particular your fellow US citizen. You rise together or die together. It is very hard to isolate yourself from others, especially when you share a country.
    So I recommend two possible things for you.
    a) leave the US and work in Singapore or HK.
    b) accept the burden and chose politics that encourages good and aims to lift all boats.

    A lot of terrible choices have been made in the US since 2001. Those bills will have to be paid before you can even think of seeing a better political arrangement. If you really don’t want to pay them, leave the USA for the next 8 to 12 years.

  25. W T F commented on Feb 5

    At Feb 5, 2008 8:47:51 AM cinefoz wrote:

    I proudly repeat my belief that housing will turn upwards later this year, probably in late spring or summer. To the idiots who can’t read simple English, I do not mean that housing prices will be off to the races again. Rather, I think this will mark the inflection point to normalcy again.

    Sounds interesting. Cinefoz, what metrics do you use (e.g. rising sales of new homes, rising sales of existing homes, etc.) to confirm the inflection point to normalcy again.

  26. Steve commented on Feb 5

    Jombi,

    Just because you have a expensive piece of paper doesn’t mean sh*t. Accept it. The modern economy is like evolution, there is NO MORALITY in nature nor our economy.

    If your not paranoid then something is wrong with you. Better get that fear in your head so you can make cold decisions. The American century is over. How are you going to thrive in a economy in which the USA is just another player? Answer. Make money, don’t spend it, add time plus the magic of compound interest. Simple.

    Oh, and consider having running water to equate with being rich. I do.

  27. rexl commented on Feb 5

    Jombi and Shane: you both give me more pause about the future of our nation than high taxes ever have.
    So you want to be great engineers, multi-millionaires, chick magnates, masters of the universe.
    How special. I guess the economy has surpassed Iraq in the minds of voters.

  28. toady commented on Feb 5

    Jombi, you are 23 so having taken yourself out of the job market for 6 years to pay for an education.

    What no one told you is that taking yourself out of the job market to buy an education means that your income curve starts later, rises slower, peaks higher, and peaks much longer (on average) than a semi-skilled blue collar worker.

    I’m a 31 year old lawyer. My peak won’t happen until I’m about 40 and will last until my 60s.

    Your lament seems to be about getting a master’s degree instead of framing houses at $40-60/hrs or other high paying manual labor.

    I am unconcerned about my final tax percentage rate. I am concerned that it is fair in comparison to all income earners. The reason is that the price of goods and services are set in relation to the prices the market will bear and if my education-fueled income exceeds that of the average wage earner, then I’ll be ok. If the tax rate is unfair, I can be doing well but still losing ground people who have the ability to price items (e.g. vacation homes, commercial investment buildings, etc.) out of my reach.

    I would pay 70% of my income in taxes if I knew I was guaranteed a decent retirement, good health care, a broad social safety-net (if I become unable to work), and a level playing field. Right now I’m paying 47% of my salary to taxes, 18% to health care, and 15% to retirement and the playing field is very tilted.

  29. VJ commented on Feb 5

    Shane,

    when on God’s green earth did it become morally right to forcibly take one man’s earnings and give it to another

    Yep, the massive level of Corporate Welfare is absolutely disgusting.

    ~

    Say what you will, but in the times when the opportunity for real change comes (not trying to get too political), like Perot or Paul, the masses really don’t want it-they’re institutionalized in the system.

    Ah, yes, an ongoing mystery as to why the American people rejected a 50 cent per gallon gasoline tax (Perot) or reject eliminating Social Security, Medicare, the Federal Minimum Wage, and on and on… (Paul).
    .

  30. VJ commented on Feb 5

    toady,

    I am in no way diminishing the sentiment behind the bulk of your post, however:

    Right now I’m paying 47% of my salary to taxes

    I’d be hard pressed to find anybody in America paying 47% of their salary in taxes.

    I think perhaps you are adding up tax brackets as percentages, which they are not.
    .

  31. Shane commented on Feb 5

    “I would pay 70% of my income in taxes if I knew I was guaranteed a decent retirement, good health care, a broad social safety-net (if I become unable to work), and a level playing field.”

    My goodness, if this is what we’ve become heaven help us all.

    “Those who would give up Essential Liberty to purchase a little Temporary Safety, deserve neither Liberty nor Safety.” ~Benjamin Franklin

    As a relatively young person (28), I’ve probably traveled the world more than most at my age, I’ve traveled to Europe, England, Holland, Canada, lived in Argentina for 2 years, and lived in a war-zone with bombs going off. I’d say the best experience was Argentina. I saw the exact same thing you preach practiced. People gave up their freedom, their prosperity, their wealth, to be assured “retirement” and a “safe-living”.
    All it did was to encourage laziness, slothfulness, a desire to cheat, steal, and a desire to beat down those who actually did something with their lives.

    You know it’s great that you want to give up 70% of your income for security. . . tell you what why don’t you go to some private charity and give it to them, and then when you are 70 take it back. This type of attitude boils my blood so much it’s hard to effectively communicate without going overboard.

    SS the biggest ponzi scam in the history of the world-completely dependent on each successive generation being bigger than the next and inflation. Let me get this straight, for you folks who want a good retirement at the public expense. You want to sit on your fat lazy bums, drinking tequilia living the “good-life” on a boat in San Juan, while sucking money off your kids, and grand-kids, b/c they need to pay their fair share or b/c they owe it to you.

    Meanwhile, the 28 year is getting hammered with inflation, taxes, housing, food costs, feeding newborn babies, working 60 hours a week, going to war-zones, to provide a stable life and a better one for his kids.

    I don’t want to leech of anyone else, I never have and I never will, I would rather die living in a dumpster than suck at the public tit. Why, b/c I know that I will make it work, and I don’t need some government hand-out to do it.

    The true American Spirit is the can do, Independent, Freedom-loving, Don’t Tread the @#$# on Me, and Leave me the !@@#$ alone attitude, embodied in movies like Cinderella Man and The Pursuit of Happiness.

    Venturing into politics slightly (sorry), I realize and so does Paul completely eliminating right now entitlements to those who are dependent on government care is a little unrealistic. After becoming dependent on welfare, it’s hard to just cut it off. He would want to let people start to opt out, like me thank you.

    As a side note, we wouldn’t even need SS if you eliminated the biggest destroyer of wealth, inflation. Typically a person has some 40+ years to build for 10+ years of retirement. If you eliminated inflation, what they earned when they were 20 would be worth the same when they are 60 and they would be able to save for 10+ years of retirement. If we actually taught fiscal responsibility in schools, i.e. don’t go into debt, save for a rainy day, jobs are not secure, etc,etc, and didn’t have a system that encouraged irresponsibility on fiscal matters we wouldn’t need half the programs we have.

    Everyone looks to government for the solution, when they don’t realize government is the problem! Less government (eliminate all but essential expenditures) and more personal responsibility.

  32. jombi commented on Feb 5

    It’s called direct and indirect taxes VJ … Federal Income tax is not the only way you are taxed……
    State, Federal, Sales, Gas, Property, AMT,…
    There are way too many to name. Effectively though, you are getting taxed way more than you think…

    Given my educational background, I think I know know how the federal tax brackets works.

  33. VJ commented on Feb 5

    Shane,

    SS the biggest ponzi scam in the history of the world

    That’s gibberish.

    ~

    we wouldn’t even need SS if you eliminated the biggest destroyer of wealth, inflation.

    Prior to the enactment of Social Security the majority of American senior citizens lived in abject poverty and the inflation rates were very low.

    ~

    Everyone looks to government for the solution, when they don’t realize government is the problem! Less government (eliminate all but essential expenditures) and more personal responsibility.

    You would absolutely LOVE Somalia. Just don’t forget to take your Kalashnikov and a flak jacket.
    .

  34. VJ commented on Feb 5

    jombi,

    It’s called direct and indirect taxes VJ … Federal Income tax is not the only way you are taxed……
    State, Federal, Sales, Gas, Property, AMT,…

    I’m well aware.

    However, almost 80% of American taxpayers only pay about 5% of their income in federal income taxes, and most of the other 20% only pay about 10% of their income in federal income taxes. Given that federal income taxes are far and away the largest tax bite, 47% ?, you can’t get there from there.

    ~

    Effectively though, you are getting taxed way more than you think…

    Quite to the contrary, most people are not taxed at anywhere near the levels they “think” they are.
    .

  35. rexl commented on Feb 5

    mike g., you devil, you changed your name.

  36. Shane commented on Feb 5

    Hey VJ,
    I didn’t say NO Government, I said LESS government, only the functions specified in the constitution- so you can stop with the BS ad hominen attacks.

    And yes, please the mighty government will save people . . . you would LOVE COMMUNIST russia.

    Governments exists to protect basic rights, such as property, life, liberty . . . not to ensure you have a wonderful retirement!

  37. Paul Jones commented on Feb 5

    We payroll tax young workers who don’t have health care to pay for the health care of others.

    The young have been in a Depression for a while now.

  38. jan perlwitz commented on Feb 5

    I actually don’t understand why Shiller is saying the 8% decline in housing prices means a loss of 2 trillion or so US-dollars in the economy already. Then he compares this number with the GDP.

    Isn’t this 2 trillion dollar “loss” just a decline in the book value of assets? A fictive number assigned to assets? Certainly, people have made or will make real losses in the housing market with respect to their budget, if the bought high and sell low. But there is always the other side of the trade. The ones who made a gain. Regarding that, I don’t see any difference to the stock market or other assets traded. The money invested in the housing market or stock market won’t be lost in the economy, when the book value of the assets declines. It just has been redistributed to someone else. Thus, integrated over the whole economy the gain will be Zero, when asset prices inflate, or the loss will be Zero, when asset prices decrease. Inflating asset prices doesn’t create wealth in society, decreasing asset prices doesn’t destroy any. If it were different, a society could make itself richer and richer only by circular trading at higher and higher prices. Sort of an economic Perpetuum Mobile.

    Am I missing something about Shiller’s statement?

  39. VJ commented on Feb 6

    Shane,

    I didn’t say NO Government, I said LESS government, only the functions specified in the constitution

    And those would be ?

    (this should be good)

    ~

    And yes, please the mighty government will save people . . . you would LOVE COMMUNIST russia.

    Except Russia has never had a “communist” form of government.

    Why is it that so many people lack a dictionary these days ?
    .

  40. Fori Multiprad commented on Feb 7

    What will get us out of this “housing bust”. First of all, it’s NOTHING like the depression. The whole idea of that is stupid.

    The thing that will get us out of this housing bust, is DEMAND. Demand will be stimulated by immigration. Immigration will be assurred by the election of John McCainnedy.

Read this next.

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