New at Reason
Steve Chapman whoops up one cheer for the housing bust.
Comments to "New at Reason":
M | September 27, 2007, 6:40am | #
Actually, it's likely to push rental prices upward. Rents have been sorely depressed due to the ease of home purchase. Now some of those marginal buyers will be forced back into the rental market. Rents started going up in my area last year-- for the first time since 2002.DADIODADDY | September 27, 2007, 7:13am | #
man's going to get into trouble appying logic to economics like that...isn't it more fun to just get hysterical"when in danger, when in doubt...run in circles, scream and shout"
Jennifer | September 27, 2007, 8:05am | #
I've been saving since 2004, waiting for the bubble to pop. And I'm even more annoyed than usual with those folks in government who talk about "bailouts" and "wanting to prop up the market." Why in the world would you think it's BAD for housing prices to drop back to levels that ordinary people can afford without either taking on ruinous debt or gambling on the assumption that affordability doesn't matter because when things get too costly to handle they can just sell the house for a profit?Hmmph. There are places so bubble-inflated that only people in the top ten or twenty percentile of income earners can afford the median home price. How is that supposed to be sustainable, and more importantly, why would anyone outside of a commission-hungry realtor* WANT to sustain it?
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*I know, "Realtor" is supposed to be capitalized. I refuse.
Please help. How is a 4.5% drop after a 45% increase a big deal?
jon | September 27, 2007, 8:23am | #
When times are tough for the poor and middle class, any talk of help is derided as socialism. But as soon as the banks are taking a hit, it's as if capitalism doesn't matter: let the Fed and the Congress help the poor folks at our banks and investment houses!Yeah, because if those guys aren't around to help us we might have to find some other guys to help us. Which would be terrible, since no other country has such a thing as bankers or investors.
Doctor Duck | September 27, 2007, 8:25am | #
@Lamar:T-T-Timing.
The 4.5% drop doesn't necessarily affect the same people who saw the 45% gain.
Not that I care, but that's the reason.
Just curious, 'cause everybody keeps saying "ain't it great?" at how younger people can afford houses now, and the poor will benefit. It seems like a house that was $150,000 a few years ago went up to $225,000, and is now down to $215,000. Should I be excited about this? If so, I'm going to have to fake it.
crimethink | September 27, 2007, 8:41am | #
Lamar,I think they're saying that, to the extent that this is bad for current homeowners who were looking to sell, it's good for those looking to buy. Given that the 24-hour news cabal is painting this as the biggest tragedy since Black Tuesday, it's an important thing to keep in mind.
crimethink | September 27, 2007, 8:43am | #
jon,Nice strawman. When has reason advocated bailouts for banks that made bad loans?
We libertarians may be heartless, but we're pretty consistent in our heartlessness.
Rhywun | September 27, 2007, 8:46am | #
Rents in NYC only move in one direction--it's just a matter of how quickly. The last few years the speed was unheard of. And the rock-bottom dollar doesn't help things, either, when you're competing against foreign trust-fund kids. When I was priced out of my place in Manhattan last year, that's all that came to view my apartment.Crimething, when did I say Reason did that? I was just commenting on what has been said, mostly by talking heads on talkshows, politicians, and others. It does include some libertarians, but not many. Most libertarians aren't powerful enough for their business interests to mess with their political compasses.
Didn't the Fed infuse the market with cash, and hasn't Bush been talking about a Fannie Mae (or something) bailout?
crimethink | September 27, 2007, 8:58am | #
Sorry jon, I thought you were another "You people don't care about the poor!" interloper.crimethink | September 27, 2007, 9:02am | #
Lamar,Yes, the Fed did "inject liquidity" (ie, crank up the printing presses) and I wouldn't be surprised by any stultified move made by Bush at this point.
If you bought your house for the reasons of wanting to live in it, then you thought it was worth it at the time. You should be happy about a depressed market because as he assessed value of your hose decreases, your property taxes go down. If you bought the house as an investment, well thats pretty much how investments go, you win some, you lose some. Sorry, too bad, tough luck, oh well, better luck next time... Do you detect a complete lack of sypathy for the buyers here? For the mortgage holders it's, I'm not really sorry, too damn bad, tough fucking luck, you made your bed... Do you detect a note of hostility here? I'm a capitalist thru and thru. Losers have to suck it up and ought to quit whinging.
Lamar | September 27, 2007, 9:18am | #
"If you bought your house for the reasons of wanting to live in it, then you thought it was worth it at the time."Or, as is the case with many, you thought that your neighborhood would be filled with families. Instead, you were mislead and bought into a ghost town...or better yet, a flipper's graveyard. You still live there, but you kind of got hosed.
Cracker's Boy | September 27, 2007, 9:23am | #
Me too, Crimethink. I saw "jon" and thought it said "joe" and ASSumed he was bustin' "our" chops.CB
J sub D: I should clarify that I am glad, oh so glad, that house flippers got nailed.
robc | September 27, 2007, 9:30am | #
Or, as is the case with many, you thought that your neighborhood would be filled with families.People need to understand that they dont have control over what other people do with their properties (subject to some limits).
A funny incident happened near me. Farmer sells 1/2 his farm, it gets rezoned to residence, nice homes gets built. A few people in the area tried to fight the rezoning, but not many and not hard, it was going to happen. A few years later, repeat with 2nd half of farm. Who tried to stop it this time? The people who lived on the 1st half. Did they think growth/sprawl was going to stop with them? What did they think was going to happen to that big field next door located inside a city?
cb | September 27, 2007, 9:45am | #
For every loser, there is a winner.No.
P Brooks | September 27, 2007, 9:51am | #
Saying, on aggregate, that benefits outweigh costs? That's cruel and heartless. Why not just say a falling tide makes it easier to walk to shore?In my part of the world, the pinkos have been weeping and wailing about "affordable housing." Now that housing is getting more affordable every day, I don't see them dancing in the streets. Why is that?
Lamar | September 27, 2007, 10:07am | #
"Now that housing is getting more affordable every day, I don't see them dancing in the streets."See my 8:29 post. I call bullshit on the bust. The market stopped smoking crack, but that doesn't mean it's sober.
J sub D | September 27, 2007, 10:12am | #
Who tried to stop it this time? The people who lived on the 1st half. Did they think growth/sprawl was going to stop with them? What did they think was going to happen to that big field next door located inside a city?Kind of like all of Portland OR. IOW, I've got mine, fuck you, cloaked in environmental, intelligent growth, sheep's clothing. That is so
Lamar | September 27, 2007, 10:21am | #
"IOW, I've got mine, fuck you"Or, in the words of Cool Hand Luke, "Stop feeding off me. Get out of here, I can't breathe."
P Brooks | September 27, 2007, 10:27am | #
Lamar-You're absolutely right; there is still a ton of froth in the market. My point, such as it is, is that the City Commissars are utterly convinced they must step in and "fix" the problem; the idea that market fluctuations might be self-correcting (or that people will makes rational alternative choices) flies in the face of their collectivist mentality. No doubt, when people start taking advantage of buying opportunities, they will be vilified as "vultures."
Rhywun | September 27, 2007, 10:33am | #
I am glad, oh so glad, that house flippers got nailedHell yeah. "Flip" is one of those words that now makes me cringe a little inside, kinda like "surge" and "homeland".
JBinMO | September 27, 2007, 10:39am | #
I was talking to a builder yesterday, he told me the gut at a bank in Kansas City who he deals with receantly moved from Detroit to KC. He had bought his house a few years ago at $400,000, the best offer he has gotten $150,000. Evidentally 53% of the homes in Detroit city limits are empty. Don't know how much of the story is true. I work in the mortgage businedd. I deal with people in Michigan. All arounf the state, if you bought a home last year for $250,000 it is now worth about $200,000 to $220,000. On the other hand in Wyoming they are still seeing crazy appreation.Peacedog | September 27, 2007, 10:43am | #
Actaully, this is just foreshadowing of what is to come in the housing market. As the boomer generation retires the housing market is going to go through a massive correction. The boomers are by far the least prepared generation for retirement in US history. Many didn't have kids, few have pensions and according to some economic estimates their overall wealth comes in at about $100,000 USD per capita. In other words, 2 to 3 years after retirement they are going to be selling their homes in droves. If you want a real bargain just wait 2 to 5 five years.Somehow I find it fitting that the generation that never wanted to grow up is finally going to face some pain for 70 years of pawning off all of their responsibilities on the rest of us.
JBinMO | September 27, 2007, 10:48am | #
Those old people will be going to vote in droves. Higher taxes and handouts all around.robc | September 27, 2007, 10:58am | #
If you want a real bargain just wait 2 to 5 five years.Which is why I am "wisely" closing on a house next month. I would have moved into it over the summer, but while it is easy to find a good house cheap, it is hard to sell a condo at close to a reasonable price. Im on the 2nd extension of my contingency deal. But, things have now happened, so its all going forward. Im not worried about what the price may do over the next 2-5 years, I have been in my condo for 9 years and plan to be in this house much longer than that.
If I hadnt sold my condo during this extension, I was pulling off the market and just going to wait 2 more years and try to buy a nice house even cheaper.
ChrisO | September 27, 2007, 12:20pm | #
Please help. How is a 4.5% drop after a 45% increase a big deal?That's just the first part of the drop. The housing crash is likely to continue for several more years. California housing prices in the last bubble peaked in 1989 and dropped for about seven years.
These are just averages, by the way. Some markets rose much more than 45% (more like 200%) and will probably lose 50% or more. Often, markets "over-correct" for a period, particularly if a recession or prolonged credit crunch is involved. Americans are so heavily in personal debt that I think things could get a bit ugly in the next several years. Housing may go down a lot.
ChrisO | September 27, 2007, 12:23pm | #
Actually, it's likely to push rental prices upward.In some areas, perhaps. On the other hand, a lot of unsellable housing enters the rental market also, helping to keep rents reasonable.
William Walsh | September 27, 2007, 12:31pm | #
My two cents worth: Caution to those who advise "waiting" two years to get an even bigger bargain.Perfect timing is extraordinarily difficult in any market, especially one as illiquid as real estate.
Further, previous real estate busts generally didn't last two years. Real Estate, perhaps uniquely, can't fall forever. When prices drop dramatically, sellers take their properties off the market and the newly illiquid market makes a comeback. It might not happen this time but it might. Watch for it!
Bill Walsh
Peacedog | September 27, 2007, 12:57pm | #
Good point on timeing of real estate purchases and the issue of rents.However, the real 800lb gorilla in the room is still the issue that we have an entire generation (that is numerically quite large) retiring in the near term that has effectively not planned for retirement.
Their only real assets are their homes. They will sell. This should go a long way to correcting the frankly unrealistic prices in housing we are seeing today.
William Walsh, it's not a question of timing the market (which is often futile), but of waiting until housing prices come back in line with incomes. Things are so out of whack now that it will take a huge drop for it to make financial sense to buy a house. Personal income is always the bottom line.
Rhywun | September 27, 2007, 2:06pm | #
On the other hand, a lot of unsellable housing enters the rental market also, helping to keep rents reasonable.Interesting point. So many rentals being converted to co-ops probably helps explain why rents in NYC have skyrocketed just like mortgages.
Edward | September 27, 2007, 2:34pm | #
What does the sinking dollar mean (real question)?cynical bastard | September 27, 2007, 2:36pm | #
P Brooks:"Vultures" you said? Already started... : http://money.cnn.com/2007/09/24/real_estate/vultures_circling/index.htm?cnn=yes
prolefeed | September 27, 2007, 3:16pm | #
Edward: the "sinking dollar" means that dollars buy fewer units of a given foreign currency. That is, our fiat money is being printed faster than the rate of growth of our economy, and is being devalued and inflated, relative to other countries.The Fed's move to bail out housing by dropping interest rates means inflation will be going up, which resulted in investors in other countries taking that into account almost immediately and devaluing our fiat money compared to their fiat money.
MayorOmalleySuxs | September 27, 2007, 10:25pm | #
Kind of like all of [Howard County, MD]. IOW, I've got mine, fuck you, cloaked in environmental, intelligent growth, sheep's clothing. That is so clever, transparent, nobody everybody can see through their smokescreen.,/i>The sinking dollar means that you're going to be renting your apartment/condo/house from some guy who lives in France.
Dr. Jackpot | September 28, 2007, 8:07am | #
Keep in mind that lower prices mean less capital gain taxes for governments and lower property taxes. This is why governments will build a floor under falling prices. It's not YOU they care about.Johncjackson3rd | September 28, 2007, 2:13pm | #
I'm glad I stayed away from houses and decided to only flip more lucrative property like websites and domain names.John cjaxson the 3rd | September 28, 2007, 2:20pm | #
Since my property taxes are tied to the public school system, I seriously doubt any price decreases will result in actual lower property taxes. For one thing assessments are always lower than appraisal/sale value, anyway. Then the % will just be raised in many places. I already have a ballot issue twice a year for expiring property tax hikes that need to be expanded. They will just keep pushing and increasing the bases and % used, and so on. Somehow the revenue supposedly decreases as the population increases.st4rbux | September 30, 2007, 1:26pm | #
"The boomers are by far the least prepared generation for retirement in US history."I thought the boomers were only the second generation to even encounter 'retirement' -- before the Greatest Generation didn't everybody work until they died (or were taken care of by their family)?
Retirement, as we've come to know it (rather, as the government and the financial services industries have sold it), is a relatively new concept.
John | September 30, 2007, 9:01pm | #
Ha ha all...As a boomer,my house...read, home, is paid off. I my not be able to sell it or rent it but I'll always have a home and you ungrateful young-in's are going to be paying the oil and electric bill for poor retired old me. Please take care of those bills while I'm sailing off Baja will ya?HA HA HA......... suckers
John | September 30, 2007, 9:10pm | #
Ha Ha HA suckersYou all voted for the the old republicans that are going to take your money and give it to me and my freinds. gotta go...My house is paid off but I'm old and need to fill out my application for food stamps....can't work any more because of a bad back he he he...where did I put my passport? Don't forget to pay for our wars while your paying my electric and oil bills.....
HA HA...my house is paid off and you kids will get to pay me for my "sacrifices"
SUCKERS
Dr. Kenneth Noisewater | October 1, 2007, 6:02pm | #
Further, previous real estate busts generally didn't last two years. Real Estate, perhaps uniquely, can't fall forever.ああ、実際にか。
The US may very well be staring down the barrel of its own "Lost Decade"...
Dr. Kenneth Noisewater | October 1, 2007, 6:16pm | #
BTW, rents are limited by the ability of folks to pay, and you can't fake paying rent like you can qualifying for a NINJA loan. Rents may very well rise (especially if underwater "landlords" need to cover a HELOC-stuffed neg-am mortgage that just turned into a huge, stinking, expensive pumpkin) but if renters' incomes don't rise along with them, then those residences will not be rented.. And what happens to all those unsold or foreclosed condos? Into the rental pool..Dr. Kenneth Noisewater | October 1, 2007, 6:22pm | #
My house is paid off but I'm old and need to fill out my application for food stamps....can't work any more because of a bad back he he he...where did I put my passport? Don't forget to pay for our wars while your paying my electric and oil bills.....HA HA...my house is paid off and you kids will get to pay me for my "sacrifices"
SUCKERS
Oh that's OK Gramps, there's plenty of room in the Mandatory Euthanasia centre, since National Health has determined that you are no longer economically viable.