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Wednesday, June 1, 2011
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20 comments:
Case-Shiller by Metro Area Since 2000
So, in 2020, WDC will be 335 and Detroit 45?
I mean, WDC up another 83% and Detroit down another 33%.
Somethin's gotta give.
Whoa, weak ISM, weak ADP employment, confirmed double-dip in housing...
It's obvious to me that the Fed needs to purchase another $1 trillion in MBS, Congress needs to pass a $15k tax credit, and Obama needs to put together another stimulus package.
Funnier things have happened...
Robert,
Where are you seeing the 2020 projections?
What do you mean by "somethin's gotta give"?
http://www.redfin.com/VA/Falls-Church/7519-Fairwood-Ln-22046/home/9551505
I had originally intended to make a snarky comment about how absurdly overpriced this house was. Which it is, but I wanted to get some stats on recent sales to back it up. Then I tripped across this sale along the same street that closed last week:
http://franklymls.com/FX7572873
Unreal. My house in the same neighborhood was assessed at $538k when we refi'd in the Fall. Does a deck and additional room really go for $100k more, or are we off into another delusional stratosphere here?
Speaking of which, considering the $685k list and $634k sold for pretty much the same house (minus the small additions), I hope the poster on here that put in the offer on the kind of run-down place down the block scored it for the final $455k sold price!
I dont know about WDC hitting 335 in the next 9 years. The housing bubble was likely a once in a lifetime experience, so its probably best to assume normal (or perhaps below normal) growth for a while as we work off the excesses of the last decade. My best guess for WDC in 2020 is somewhere between 200-240, a far cry from 335 and still below the 2006 peak of 251.
As for Detroit, who knows where the bottom is. If they keep hemmoraging away people like they have been doing, prices hitting 45 is certainly possible. Detroit could house 800K people, but now only has 600K residents left. If in 10 years Detroit still could house 800K but only has 500K residents, prices should keep on declining.
Housing in detroit is kinda like housing in death valley, or any place people dont want to live. Eventually, the land value could get down to near $0, and the only value is the salvage value of the lumber, copper, etc. in the house.
Fred, the sold house has been xxxd out so I can't see any improvements (description or photos). But houses with nicely done, high quality new kitchens and baths, new windows, new systems, etc., can easily vary by tens or even hundreds of thousands of $ in value, because that's how much good improvements cost. If that applies to this house, that and the additional space or land could account for the higher selling price.
Detroit's main problem is high unemployment in a formerly high paying industry (for middle class workers). Until that turns around, housing prices won't either.
Robert-
I know you are joking about the three things you mentioned, but I would not be surprised at all if we start QE3 in the next ~6 months. As long as interest rates continue to be low and inflation is at reasonable levels I expect QEs to continue. A little inflation is useful in helping fix our countries debt problems and make people not underwater. So for our countries good I don't see any reason not to target 2-4% inflation. I think that it should be used in some combination of fixing the budget through a mix of higher taxes and lower spending
HB says
"I don't see any reason not to target 2-4% inflation."
why not 10%?
All an inflation policy does is move wealth
from One pocket to another.
For working poor making low wages and with minimal increases, that's just pushing them off the edge.
For the retired with heavy cash savings, you bleed them.
Why? To bail out wall street and underwater homebuyers?
fix bankruptcy statutes let the underwater do cram downs and forget it.
Anonymous,
I think the unknown about WDC housing over the next decade are the black swans and their impact on Federal spending. 9-11 and the financial crisis (black swans in my book) were impossible to know in 2000. Of course, looking back, Adolph Hitler, and the Cold War were impossible to predict, but both black swans that benefited WDC housing.
And going the other direction, we could have a dollar crisis leading to Greek like austerity, or a terrorist nuclear event in DC. Both of these have been regularly predicted, so they are not really black swans, but you get the idea.
Cherie-
The way you get inflation is usually through wage increases(graph below), so the working poor should not be hurt. In fact most of the working poor have debt, so it may benefit them. If you look at the 70s & 80s the last time we had a significant amount of inflation the poor did relatively fine. Particularly if you compare that to how they did when we took the austerity deflation approach during the depression
Inflation generally helps people with debt and hurts people with savings. If you look at our country our problem is that the vast majority of people/governments have too much debt and too few have savings. Most of the savings reside with the few very rich and with people in different countries. So I am effectively recommending a redistribution of wealth from the wealthy (in our country and other countries) to the poor/middle class in our country. I do agree that this would be difficult for retired people if they do not have inflation protection in their portfolio. Although most elderly live entirely of social security, which is adjusted for inflation
Also to be clear my policy would be very detrimental for my own finances, so I am not trying to help myself, but instead am looking to help most of the people in the country.
I also am not sure why you think that an inflationary policy would help banks. In general banks own long term assets, so the money that is getting returned to them over time would be worth less and less as inflation eats away the value of the money.
Our country needs to take a lot of pain, no matter how we look at it, but personally I think using inflation would help reduce some small amount of the pain compared to other approaches of fixing our problems
This is a graph of wages vs. inflation It is clear that wages don't react immediately to inflation, but definitely follow inflation trends
Fred, I walked through that sale. It wasn't really that nice, in my opinion. You can still see pictures here. Maybe others liked it, but I would have much rather had this one for $590K with a bigger lot and breakfast room addition. The currently listed one doesn't look, at least in pictures, to be significantly nicer than any of the comps between $565K and $600K.
New inventory numbers are out. Still look good. Same as last year.
I just saw David Gergen on CNN calling for a homebuyer tax credit. He probably read my post this am.
http://www.pbs.org/newshour/bb/business/jan-june11/housing_05-31.html
http://www.nakedcapitalism.com/2011/06/voice-demands-immelt-ge-bank-of-america-jp-morgan-address-foreclosure-crisis.html
Robert-
That is pretty comical timing. Although I just can't imagine that the government would possibly do another tax credit, seeing adamant the government is on cutting back spending
Pat-
What are you trying to get at with the voice article? Do you want banks to start modifying loans? Wouldn't that hurt you in the sense that there would be fewer foreclosures to drive down prices. Personally I am fairly indifferent towards loan mods vs. foreclosures. The question is do you want to help the people who are already in the house or people would like to buy the house.
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