Beware the bubble

Post #54,496 by marlowe 10/2/02 12:53:34 PM Reply	Beware the bubble [link\|http://afr.com/world/2002/06/27/FFXL7MR3W2D.html\|It just doens't add up] [link\|http://www.angelfire.com/ca3/marlowe/index.html\|http://www.angelfir...e/index.html] The nihilists and the liars have buried truth alive in a shallow grave. "We never voted for Saddam" - Imam Husham Al-Husainy
Post #54,498 by drewk 10/2/02 1:15:35 PM Reply	Less chance of a bubble in residential real estate One of the prime causes of stock market bubbles IMO is short-term players trying to make money on price, rather than earnings. This can only work while prices are growing faster than inflation. Most residential purchases are for at least two years, with a significant percentage lasting even longer. There's just not the quick-buck mentality that fuels "greater fool" syndrome. Basically, people buy a house because they need a house. Resale value may be a consideration when choosing between closely-matched properties, but it is rarely the prime concern. Even the issue of whether it is a "buyer's market" or a "seller's market" is hard to pin down, because sellers are generally buyers at the same time.[1] If a home can provide a necessary service (shelter) while retaining its value and sheltering captial from taxation, it's a win even if you don't "make money" off the sale. Commercial real estate, on the other hand ... see Tokyo for why that's different. [1] The Silicon Valley real estate market is warped by a gold rush effect. The number of people suddenly entering the market as buyers only, with high expectations and resources, made it vary much a seller's market. === Microsoft offers them the one thing most business people will pay any price for - the ability to say "we had no choice - everyone's doing it that way." -- [link\|http://z.iwethey.org/forums/render/content/show?contentid=38978\|Andrew Grygus]
Post #54,503 by inthane-chan 10/2/02 1:27:04 PM Reply	Seattle == Silicon Valley/2 We're not as bad, but we had a bit of a rush - I pity any city that gets labeled with "Most liveable city." The situation I'm seeing here is that there aren't the buyers to justify the prices - but people bought for so damn much they're refusing to sell for any less. This is a bit of a problem, and eventually something's going to give, and it's going to give HARD. Seattle's done for now, stick a fork in it. Brandi? End of world rescheduled for day after tomorrow. Something should probably be done. Please advise.
Post #54,519 by Brandioch 10/2/02 3:13:24 PM Reply	We're looking to sell soon. We'll see how much we can get. If nothing else, a developer will probably want it 'cause they'll be able to but two or three houses on our lot (big yard). After that, I'm going to live in a cheap one room apartment and stash my cash for the coming drop. We still have a LOT of Microsoft money around here. Remember, you'll PROBABLY sell your first house within 5 - 7 years. That's why they offer those balloon payment thingies. Seatac might be an option. If you can take the noise from the planes and you don't mind a less than perfect neighborhood. Also, look for van pools and the like if you can't get a close enough bus route. Particularly if you work in Seattle. My bus commute is 20 - 30 minutes. But the bus stops running at 6pm. Seattle is just not setup correctly. I might end up in Portland, anyway (job transfer).
Post #54,524 by inthane-chan 10/2/02 3:37:45 PM Reply	Hey, where do you work, anyways? Gotta actually meet up one of these years... Preferably before you leave for Portland. End of world rescheduled for day after tomorrow. Something should probably be done. Please advise.
Post #54,570 by Brandioch 10/2/02 7:50:48 PM Reply	One Convention Place
Post #54,655 by inthane-chan 10/3/02 11:12:39 AM Reply	LMAO! I'm three blocks from you right now. Wanna do lunch next week? End of world rescheduled for day after tomorrow. Something should probably be done. Please advise.
Post #54,883 by Brandioch 10/4/02 11:34:00 AM Reply	Week after is the soonest. I'm bouncing between portland and seattle.
Post #54,887 by inthane-chan 10/4/02 11:42:52 AM Reply	Need contact info... Unfortunately, I can't find your e-mail address. The website for my company is [link\|http://quorum-irb.com\|http://quorum-irb.com] My internal user name is twalkup, which is the same as my external address. You can reach me via the resultant e-mail address. End of world rescheduled for day after tomorrow. Something should probably be done. Please advise.
Post #54,568 by ben_tilly 10/2/02 7:47:35 PM 4/20/03 10:37:33 AM Reply	Nearly 100% chance IMO I believe that there already is a bubble. Which makes it a rather bad risk that there will be one. :-) What is fueling this one is low interest rates and easy loans. As a result people feel they have more buying power, and so are willing to bid up the price of property. Also a lot of people have refinanced, and while they are refinancing they get some cash and go out and spend it. (Hence fueling a big chunk of the consumer spending that has been propping up our economy.) But where is the speculation behind a bubble coming from? It is from the other side. Banks bundle loans into bonds, and sell those to investors. Investors who are moving money out of stocks move them into those bonds. That provides lots of money to banks to lend again. Since banks actively want to make lots of loans, and have lots of money to do it with, they are in a position to offer very generous terms, completing the cycle. So how could this fall apart? The problem is that fairly soon interest rates hit an effective bottom and refinancings stop. At that point consumer spending is likely to slow and consumers will be in the same debt-heavy position as businesses. What this means is that everyone now needs money to make payments. If everyone wants money, and nobody wants to spend it, then you get deflation. You also get badly hurt businesses. Badly hurt businesses have to lay people off. People now cannot make their mortgage payments and want to sell their houses. But thanks to general deflation, the house prices have started to fall. So you get defaults, which dry up the supply of loans, and without those would-be buyers cannot spend as much, completing the cycle. We just had trillions of dollars appear out of thin air and get the label of "real estate value". Just like the trillions that appeared out of thin air in the stock market, there is nothing to stop it from going back where it came from. The good times go, but the debt hangover stays with you. (And if we get serious deflation, that debt is going to really smart!) Cheers, Ben "Career politicians are inherently untrustworthy; if it spends its life buzzing around the outhouse, it\ufffds probably a fly." - [link\|http://www.nationalinterest.org/issues/58/Mead.html\|Walter Mead] Edited by ben_tilly April 20, 2003, 10:37:33 AM EDT Expand All History
Post #97,480 by deSitter 4/20/03 11:00:53 PM Reply	Re: Nearly 100% chance IMO Isn't this what happened in Japan, more or less, in the mid-80s to mid-90s? -drl (Dm - 2Am)(Rmn - 1/2gmn R + 1/2Fmn) = 0
Post #97,481 by ben_tilly 4/20/03 11:05:01 PM Reply	Yes "good ideas and bad code build communities, the other three combinations do not" - [link\|http://archives.real-time.com/pipermail/cocoon-devel/2000-October/003023.html\|Stefano Mazzocchi]
Post #97,523 by Ashton 4/21/03 5:38:58 AM Reply	Econ Laureate LRPD: Unintended consequences
Post #54,501 by inthane-chan 10/2/02 1:23:48 PM Reply	Commented on that in my original post. I'm quite aware that housing prices are overinflated around here, what with the general U.S. econ being in the shitter, and the Pac. NW being even worse. Seattle's home valuations are massively overdone, in some areas probably being 3-5x actual value of house+property if sanity were to return to the market. Example: My mom bought a 2 story+basement 4 bedroom in 1977 for $200k. Sold it in 1988 for $300k after making some improvements. Same house today with no improvements since is worth at least $800k, possibly more. At the same time, growth restriction policies are screwing other folks - my grandparents had 30 acres of land across puget sound in an area called Port Orchard. 20 years ago, valuation was $800,000 - and they just sold two months ago for $250,000, because now their lots can't be subdivided to smaller than 10 acre lots with one house each. End of world rescheduled for day after tomorrow. Something should probably be done. Please advise.
Post #54,508 by drewk 10/2/02 1:57:36 PM Reply	Doesn't add up Regardless of what the real-estate market is doing, it should still cost about the same to build. Given that, wild run-ups in real-estate prices should apply regardless of what is built on the lot, or even if there is anything on the lot. Assuming there are no problems getting utilities and roads put in. What am I missing? === Microsoft offers them the one thing most business people will pay any price for - the ability to say "we had no choice - everyone's doing it that way." -- [link\|http://z.iwethey.org/forums/render/content/show?contentid=38978\|Andrew Grygus]
Post #54,510 by inthane-chan 10/2/02 2:06:07 PM Reply	The houses aren't what's causing it. The massive inflation/deflation in prices is based on the utility of the land. Yeah, the houses themselves don't cost all that much - the land is what's causing the price fluctuations. When somebody can't develop the land with as many houses (what happened to my grandparents) the value of the land drops. The other problem is that Seattle has developed a really bad case of sprawl - you can't develop any new lots in the areas where it's actually convenient to commute from. Combine this with a population that is resistant to "new" taxes to pay for any kind of public transit, and you're basically fucked. End of world rescheduled for day after tomorrow. Something should probably be done. Please advise.
Post #54,514 by drewk 10/2/02 2:28:12 PM Reply	OK, I get it. In the 70s that land would be 2 dozen lots. === Microsoft offers them the one thing most business people will pay any price for - the ability to say "we had no choice - everyone's doing it that way." -- [link\|http://z.iwethey.org/forums/render/content/show?contentid=38978\|Andrew Grygus]

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