Decades for home prices to recover

cc, what do you mean by "want it both ways"? Hey, maybe I'm being idealistic, but I don't think posting my opinion merits someone responding "You fking little stay at home imbecile who's got ZERO understanding of ECON/FINANCE." Do you?

What do you mean that we "haven't seen anything yet"? Do you think declines of almost 20% are "nothing"? Curious where exactly you think we'll end up.

Thanks falco; I've stocked up on canned veggies and gunpowder and will watch "The Road" as many times as necessary to prepare myself. Let em at it!

Here's the deal.

The fundamentals stink.

It's going to take time to play out.

That's why I say you haven't seen anything yet.

For heavens sake, let bjw be. The guy probably bought at an inopportune time, he probably didn't think there was going to be a leg down coming then, he doesn't think there's one coming now either. That's his opinion, take it for what it is, learn what you will from him, but no need to berate him.

Wait, WTF am I saying? It's w67th's raision d'etre to berate anyone with a different opinion than him while explaining himself. So bjw, I think it best for you to take his berating with a grain of salt. I think he'll even learn to love you if you call him a ninny a few more times.

On the topic at hand, you say your outlook now is most of the deflating is done. How about when you bought, what was your outlook back then?

inonada, thanks, I think, despite all the fun conjecturing on your part. I don't really know what buying at an inopportune time is; I only know what buying at an inopportune price is. This seems to escape some people, for whatever reason. I pay less than I would to rent the place, but I've never said that's the norm. I did my homework, was patient, and got more than a bit lucky (this has vexed people on here in the past). Don't really care what w67th's MO is; if he thinks his shtick helps get his point across, I'd direct him to streeteasy's own comments on these kinds of shenanigans back in ar's farewell thread. I don't mind a little back-and-forth (it is fun sometimes), but a bit of civility wouldn't be so bad either, no? Obviously, you agree with w67th, but imagine if steveF used the same tactics. I'm not so sure you'd be telling me to "take it with a grain of salt."

As for my outlook when I bought - do you mean about my place in particular, or the general market? I anticipated at least 2 years of slow depreciation and years of flatness for the neighborhood, given all the inventory issues and the poor economy. The significant leg down we had was definitely faster and sharper than I thought, but I don't regret the purchase. I'd probably live somewhere else given the rents around here, but I really love the neighborhood and am glad I ended up here. I'm sure the ninny's head will explode just from reading that. Sorry, bubba.

malthus, did the article give any indication on when Wayne, NJ will recover?

oh, i have many responses to bjw's comments.

but the seattle seahawks (7-9) just kicked ass on the saints.

awesome.

Yep, I meant about the place you bought. You're right, I should have said "what ended up being an inopportune time with respect to price" or something like that.

"For heavens sake, let bjw be. The guy probably bought at an inopportune time, he probably didn't think there was going to be a leg down coming then, he doesn't think there's one coming now either. That's his opinion, take it for what it is, learn what you will from him, but no need to berate him."

intentional self-parody?

67, inonada...the condescending posts, the ludicrous hostility to other posters who often are just observing what they see in the market (e.g. urban digs) , the incessant need to boast (on an anonymous board!!..what does that accomplish??) about investing prowess, the compulsive need to provide economic "analysis"....bonkers ...just bonkers...and not too funny (if you like 67 style humor I suggest someone read shtengart or d.b.c. pierre....please)....

sorry..just bored with this non-nuanced crap that is ruining se

you have to be kidding.

hfscomm1 to the rescue.

bjw, there could be any number of reasons for williamsburg's particular rent/buy ratio. the first thing that comes to mind is that the demographic it attracts, young people priced out (or unwilling to continue to live in the conditions at that price) of the rents of the east village/lower east side are young and many do not have the savings yet to purchase. or they are wary of purchasing altogether.

rent/buy is certainly a factor in pricing, but it's not the only one. supply/demand for sales units certainly can't be ignored just because rental rates are relatively high. if units don't sell, they may very well become rentals, and if rental demand doesn't increase at the same pace, guess what happens to your rental AND sales prices? the developers seem very willing to start up again, and the banks can't write off all of those land purchase/demolition/foundation loans.

it seems to me as if very little has been learned, we're at the peak of young people graduating from school (it starts to go down and continues to do so for at least another decade), so the increased demand is conjecture at best, and with the number of elderly likely to move to assisted living facilities in the next decade or so, which haven't even been built, i'd say they're aspirational.

how did jamie dimon describe a financial crisis? something that happens every five years or so? well, we're in the third year now.

ar, firstly, thanks for a great post (in contrast to some of the junk from others here, it's a pleasure reading a well-thought-out post with no hint of venom). I agree with pretty much everything you said, except perhaps about the Williamsburg demographic. I think it's changed more than you think, at least in my corner of the neighborhood. Young people priced out of the east village/LES are most likely also priced out here - in fact, rents are pricier than in several parts of those Manhattan neighborhoods, which is surprising, to say the least). But you're right, rent/buy is not the only factor (apologies if it came off that way in my prior posts). So far, rental demand here has been quite strong, despite new buildings opening up fairly regularly. It has to end sometime, and I've been waiting for the other shoe to drop for over two years now, so I'm done predicting exactly when it will happen; I just know it will at some point. In the meantime, people are also buying, but at a slower pace than before, obviously. So while I am not at all bullish, I think you can see why I'm not nearly as confident as bubba in foreseeing a major collapse in the near future. Sorry that really really bugs some on here.

bj: If I can help explain some of the frustration of posters thru analogy:

I remember when I was a very young child, my father had a running battle with his cousin, a medical research scientist who thought my father was an idiot to smoke cigarettes. My father argued that there was no conclusive proof that cigs caused death and even so, it was his life/his choice. Cuzin argued that there indeed was conclusive proof but it could not reach the public because all the dollars my father spent on cigs went to advertising which perpetuated a mass delusion and to lobbyists who bought off the govt so the truth could not reach the public. I will always remember that cousin saying to my father every time he lit up -- "With that match, you contribute to the death of millions"

I think that posters on this site get frustrated because they are convinced that there is enormous risk in the economy and continued risk in RE. When some posters give circumscribed points of view (in my neighborhood, in my building, this month, etc) it moves the argument from the larger, treacherous picture and perpetuates an illusion that everything is just fine. Which happens to be a point of view critical to our govt -- they need to keep prices up so banks don't collapse, so Treasuries and the dollar don't implode, so we don't fall into a deflationary cycle. Our govt, and bank lobbyists are on the same page -- they have a vested interest in keeping up the ruse that everything will work out fine. Perhaps it will -- but the Fed and the banks are sailing in waters that have never, ever been navigated before. Let's hope they make it to the shore.

In the meantime, as an individual, I think it unwise to posit that there could not be a serious downturn from here. No one can know that because we have never faced these economic circumstances before. It might be your opinion, but in these times, it should be backed up by serious macro economic facts. If the general community on this board let unsubstantiated opinions pass without scrutiny we might all be complicit in the economic demise of others. So by all means, give vent to your opinions but I think you should expect - and welcome- those opinions to be challenged.

HELLO SUNSHINE! Good day to aboutready and apt23. THANK ALLAH, there will be people who would safely transit the blacks, give shelter to prosecuted jews, to not bend to the financial fktardedness of the masses.

apt23, funny but my zinger for a smoker as I pass them by is "someday they'll figure out smoking causes cancer."

FLMAOzzzzz, bjw.. billyburg? really really? Holy motherfker.... no wonder. In 2002, I read an article of how many youngsters were moving from Alphabet City to BiBurg, it was really more of a mass exodus given rents went above $1K/month in MANHATTAN.

You may be seeing the tail end of a "bide my time in Billyburg till MANHATTAN drops to $500psf!" It's a heads up.... good luck. And mark my words in 5 yrs when you wonder where have all the cool ppl in Bburg have gone?
F
L
M
A
O

Ah, absolutes. Love 'em.

I happen to be related to a number of people who have the ability to be social smokers - as in have one or two cigarettes after drinks once or twice a week and not become addicted. Or even smoke one or two a day while on vacation and be fine. I used to freak out about this, but realized that it genuinely wasn't a big deal as long as kids weren't around.

Others, however, cannot ever have one cigarette again, otherwise major relapse into pack-a-day habit.

Y'all are smart - apply this to RE however you want.

Casual smoker is the person who rents the beachfront home during a summer month (the peak time for enjoying a cigarette, after a drink) while the buyer pays for a whole year (pack-a-day), and then some because of bubble prices (cancer), with the marginal "benefit" of spring/fall/winter enjoyment of things such as shoveling snow (stepping out to get your nicotine fix when it's 18 degrees outside).

smoking cigarettes and flipping the bird at science.
I would have liked your dad

Ino: Perfect!!. My father finally did give up smoking (after decades) and was proud that he did not succumb to lung cancer. But he refused to believe that the congestive heart failure that finally did him in had anything to do with smoking.

Saint67: no one would ever,ever accuse you of bending to f'tardness. G*d Bless You for dragging the financial cross thru the hallowed streets of NYC. ;) Save the Sinners.

"When some posters give circumscribed points of view (in my neighborhood, in my building, this month, etc) it moves the argument from the larger, treacherous picture and perpetuates an illusion that everything is just fine."

apt23, how exactly are you reading into any of my posts that "everything is just fine." Do I have to say "everything is going to crap" on this board to get the "cool ones'" approval? It seems more than a few posters here ascribe WAY too much (self-)importance to what's written on these message boards.

"In the meantime, as an individual, I think it unwise to posit that there could not be a serious downturn from here."

Come on - I've never said that it's an impossibility. I don't think it's as likely as some people, and you can think that unwise, but if we disagree, maybe w67th can dispense with the proselytizing and just agree to disagree on some things.

"If the general community on this board let unsubstantiated opinions pass without scrutiny we might all be complicit in the economic demise of others. So by all means, give vent to your opinions but I think you should expect - and welcome- those opinions to be challenged."

Again, way too much self-importance, IMHO. And my opinions are not unsubstantiated (I think you meant facts rather opinions, but ok); I expect people to challenge them, and obviously they have. But I can challenge their opinions too, right?

"FLMAOzzzzz, bjw.. billyburg? really really? Holy motherfker.... no wonder. In 2002, I read an article of how many youngsters were moving from Alphabet City to BiBurg, it was really more of a mass exodus given rents went above $1K/month in MANHATTAN."

Yeah, ninny. Stop hyperventilating and vaguely recalling "an article" you read almost a decade ago. Things are a bit different here.

"You may be seeing the tail end of a "bide my time in Billyburg till MANHATTAN drops to $500psf!" It's a heads up.... good luck. And mark my words in 5 yrs when you wonder where have all the cool ppl in Bburg have gone?"

Hey, it's your conjecture, seemingly based on nothing, but have at it. And yeah, I definitely moved for the "cool people." In which case, why aren't you here? Flmao.

If I'm about to die of cancer because I bought an apartment, does that mean I can start smoking again?

bj---nit meet pick.

wouldn't do it spin. harder for the estate to sell the unit.

my mother died of lung cancer in a house she hated. although she had given up smoking a few years earlier. wonder how that fits into the analogy?

maybe if she had traded up to a nicer home she would have quit smoking earlier and wouldn't have had lung cancer?

cc ----nit meet wit.

spin, your dash pattern is off. still, derivative.

bj: "it's my opinion that most of the deflating is done. As in, it's not done yet, but I'd bet the majority of the damage is done."

This to me implies you are saying things are just fine. And though people on this board have constantly reminded posters that 20% down will not even begin to retrace the arc of the bubble, you have not offered any evidence to believe otherwise. Bubbles generally revert to the mean which suggests that there could be a big downturn from here. I think I have posted the real dollar chart of the bubble a dozen times on this board. The chart shows a long distance down to the mean.

spin: if your new apt has drywall from china, yeah, you might as well start smoking again.

You got it all backward, spinny. Your apt is going to make you run through your nest egg faster, so you should start smoking to hasten the inevitable.

(Tongue-in-cheek on all points, in case that wasn't clear.)

as w67 has pointed out many times the last year and a half has been a strange gift brought to us by the government. if and when it ends and the music stops, will the prudent ones once again be left to bail out the bjs and spinnakers?

cc: i don't think we have to get that personal. no one is going to have to bail out spin. i doubt he will have any financial trouble and if he does, he will just write his way out of it

but neighbors are turning on each other in some parts of the country. Did you see this article in the WSJ about neighbors warring against each other. some are paying. some are not paying their maintenance or mortgage even as they rent out their apts and collect money. http://online.wsj.com/article/SB10001424052748703326204575616340542578852.html?mod=WSJ_RealEstate_LeftTopNews.. what a mess

Then again, if you made an RE purchase in 06/07 it would be a BIG mistake to smoke.
You might not be around to see your property revisit it's original sale price.

I do realize that this 'off thread' but the real problem with tobacco is the quality of the tobacco and the delivery device (the cigarette). Back in the day, this can be seen at Keen's steakhouse, people smoked from clay pipes. The tobacco filled the bowl and the 'bowl end' was placed in the fire place.
The long stem was there to cool the smoke and to handle the hot pipe. Under these conditions the amount of tobacco consumed would be modest at best. And there you have it...our problem is one of moderation.
Anything in moderation is usually tolerable. It's when we let it consume us. Look at poor David Carridine. Had he only gone for a little asphyxiation and just a little CBT perhaps today we would be enjoying yet another episode of Kung Foo.

"bj---nit meet pick."

Yeah, says the guy who was complaining about tenses earlier. How am I nitpicking exactly?

"This to me implies you are saying things are just fine."

apt23, really??? That's kind of ridiculous.

"you have not offered any evidence to believe otherwise."

Two things - first, are we back to people on this board making predictions of more than 50% off peak? 75%? What are you expecting? Second, I have explained my reasoning, but I think you were expecting me to explain something that I have not said - that is, that "things are just fine."

"as w67 has pointed out many times the last year and a half has been a strange gift brought to us by the government. if and when it ends and the music stops, will the prudent ones once again be left to bail out the bjs and spinnakers?"

Of course the government has had an active role in all this. Did you ever expect them to sit still and let the chips fall on their own? That would have been pretty shortsighted, no matter whether you agree with the policy or not. And thanks for the concern, but I won't need any bailing out. You can mind your business on that one.

the sad fact is that no one needs bailing out until they do.

my point about the government is not a reflection on whether they are right or wrong in their actions. i frankly don't have the knowledge or expertise to comment on that. the point is that the economic situation is beyond unusual. it is unique in my lifetime and based on government intervention. i don't know how long this can be continued; but i am convinced that it cannot go on forever.

actually, bjw, the gov't did sit and watch florida, california, nevada real estate crash and burn. and many other markets. it was just our luck (or not) that our real estate slide coincided with the onset of the banking crisis, which meant that the gov't needed to avoid future declines in order to guarantee the solvency of our too big to fail banks.

cc, sure, no one needs bailing until they do - that's not exactly powerful insight (no offense). But don't tell me you're forecasting that I will inevitably need it? Look, I'm totally with you that the economic situation is totally unusual (though to be fair, I'm not sure anyone will ever agree on what a "normal" situation should look like), and that government intervention can not go on forever this way. And you seem to be agreeing, finally, that the end result of all this is a big unknown. I'll never claim that's an earth-shattering revelation, but it's a hell of a lot more honest than w67th's black-and-white certainties.

ar, sorry, I was speaking about our market (think it's fair to assume that's what I'm referring to unless I specify the national market or another area). I don't think it was "just out luck" that the slide coincided with the financial crisis - we are (well, at least were some might argue) the financial center of this country, and arguably the world. People who work in that industry here also live here - again, I don't think it takes too much deep insight to have recognized that.

how much money was lost due to the decline in prices in california? really? and the gov't watched while it happened, with zero attempt to alleviate it. it was luck, a building cycle based on a prohibitive building process, and a massive gov't intervention that kept us at our current losses (i should say interventions, NYC was the beneficiary of more than one, certainly). we were the financial center of the world in the 1990's as well, and yet prices were no where near today's numbers.

w67th's "certainties" as i see them are simple, this just has the makings of a giant clusterF. i tend to agree, although i'm very tired of arguing the point.

ar, I don't mean to say that being the financial center means high real estate prices, but this real estate bubble was rooted in the finance industry, no? I don't have a problem with your or w67th's predictions - I think you, especially, add a lot here. But I'll push back when he goes after me the way he did and seems to want to squash any dissenting opinion as being a "fking stay at home imbecile" and such. I think that's more than fair.

bjw, personal attacks are usually personal. i can totally understand your not caring for w67th's insults, but as i see it, they are not personal. w67th knows little about you, and rarely posts anything that shows personal knowledge of any depth. he may not be the most polite poster here (and that's likely quite an understatement), but he's an equal opportunity insulter. unlike the troll.

i think my sympathy with w67th's positions lies in an agreement that it is just awful that so many pundits, posters, etc. try to create an environment of fear. there still is an awful lot of "there will not be a better time to buy, do so now, interest rates are rising, the irish are back (that's a joke, sort of), the chinese will buy 75% of both setai's just you wait and see, we're the finance capitol, foreigners will buy because their currency is strong, foreigners will buy because their currency is weakening and they want to get in, all of those empty prepped lots will remain undeveloped for 20 years because no banks are lending," etc., etc.

at the very worst for buyers, i see interest rates rising a bit over the next year, and prices stable to a 5% decline. at the very best for buyers, i see stable interest rates and a 10-15% decline this year (barring a complete disaster, and not including the "luxury" market). but that's just my opinion. RS spouts opinions all the time.

just tell w67th to f off. he'll respect you in the morning. maybe.

bjw,

You only feed those "greyed out" by responding. They thrive upon that. If you ignore them...well that is really nasty. And they will just shrivel up over time.

bj: you are not doing yourself any favors here. why don't you do some reading on the cause of the bubble as you don't seem to have a handle on it. Nouriel Roubini was a virtual unknown outside of small economist circles until his dire predictions came to pass. Why don't you read some Marc Faber, Robert Prechter, Peter Schiff, etc --- not because they are right in their predictions (that is so far, unknown) but because these are educated men presenting the absolute worst case scenarios backed by critical thinking. They are uber bears, extremists really. Many wise souls believe they are absolutely wrong (be careful of those who have a vested interest in silencing them). But as an investor, a homeowner, a citizen it is probably a good thing to hear the worst case. Most importantly it would lay out some reasons to be concerned and it would show that W67 is, in comparison, a cock-eyed optimist.

apt23, i'm not sure your advice is in line here. i think bjw has considered many economic scenarios, he was quite bearish for awhile. his view is a bit colored by the fact that he bought in an area that has had steady appreciation, including during the deflation. that is no guarantee of future returns. but, for f's sake, he bought a few years ago, can afford it, loves his area, isn't looking to move anytime in the near future, so who cares?

but that is certainly not guidance for those currently looking. so we continue to point that out as a counterpoint to his guarded optimism.

ar, if it were a one-off thing, I wouldn't care all that much. But he keeps at it, which is kind of begging to make things personal, no? Either way, I find it hard to believe so many otherwise rational people are totally ok with it. Guy could get his points across at least as well (and I'd say much better) if he dispensed with the condescension, holier-than-thou bs, and insults. Call me crazy, I guess.

"i think my sympathy with w67th's positions lies in an agreement that it is just awful that so many pundits, posters, etc. try to create an environment of fear. there still is an awful lot of "there will not be a better time to buy, do so now, interest rates are rising, the irish are back (that's a joke, sort of), the chinese will buy 75% of both setai's just you wait and see, we're the finance capitol, foreigners will buy because their currency is strong, foreigners will buy because their currency is weakening and they want to get in, all of those empty prepped lots will remain undeveloped for 20 years because no banks are lending," etc., etc."

ar, look, in my heart of hearts, I totally agree with you - it is awful and vile to try to incite fear, especially when people's life savings could be involved. I am however, also very wary of people who go out of their way to try to "educate" others and belittle opposing viewpoints (in a vulgar manner no less), all in the supposed name of a "greater good." Yeah, you could choose the lesser of two evils here, but I don't think the choice is that limited. You can avoid both, and that's something I've been vary careful with, I think. I'm not here to prognosticate or tell others what to do; I'm here to learn, discuss, and help out with the more mundane aspects of real estate when I can. Anything beyond that is a pretty grey area where posters' egos start to come into play. I could go elsewhere for that. So no, I won't tell him to f off - not my style.

Topper, normally I'd agree, but I always thought w67th actually made some solid points buried in all the illegible drivel. Not so sure anymore, but I'm a sucker for giving people multiple chances, even when they call me names for no apparent reason.

apt23, yeah, sorry, but what makes you think I haven't read any of that stuff? Just because it's bleaker doesn't justify w67th's methods, does it?

"but this real estate bubble was rooted in the finance industry, no?"

No, not really IMO. From my perspective, it was rooted in the homeowner / homebuyer with dollar signs in their eyes and notions of "prices always go up, or worst-case flat" despite fundamentals. Same as any other bubble. Sure, every bubble has its enablers: bankers who securitize stupid credit, institutions who buy them, rating agencies who stamp them, people who invest in them (same homeowners who want the extra 0.25% AAA credit from their bond fund because it's backed by can't-lose RE), a government whose policies promote the bubble, elected by that same homeowner society that wants policies that "increase" their wealth.

Yeah, there are those "duped" into a subprime mortgage with a teaser rate. But what about the higher-income folks who bought putting 20% down, maybe more, with vanilla mortgages. They bought with "conservative" credit, and every single bubble-buyer that I know bought with dollar signs in their eyes. Their buying without regards to fundamentals was / is the source of the bubble. Should they really be blaming the banks too?

bjw, you've been here long enough to know that getting rid of ego is impossible. it's anonymous. think spunky.

at least they've gotten rid of the troll, and you can ignore w67th. one of the painful things about the troll is that comments would appear under new names all the time, particularly at night and one the weekends, until SE dealt with the issue.

is shock therapy always bad? i don't think so. and i think that's what w67th espouses. being convinced that the real estate market is on the edge of a crater is not an easy position to take. i've backed off, although i still think the downside risks are enormous if each and everything doesn't go right. do i like posters like spin telling me for years that i'm a morose sad excuse for a human? no. and it's not true. so just roll, bjw. this isn't personal, really.

So...bottom line is that bj agrees with w67 but his/her feelings are hurt?

nada, i agree. what caused the straight studio in a yorkville walkup to increase 200%? bankers? i don't think so.

"apt23, i'm not sure your advice is in line here. i think bjw has considered many economic scenarios, he was quite bearish for awhile. his view is a bit colored by the fact that he bought in an area that has had steady appreciation, including during the deflation. that is no guarantee of future returns. but, for f's sake, he bought a few years ago, can afford it, loves his area, isn't looking to move anytime in the near future, so who cares?

but that is certainly not guidance for those currently looking. so we continue to point that out as a counterpoint to his guarded optimism."

ar, thanks. I can't count the number of times I have said that I don't endorse buying right now at the vast majority of prices out there (I will never discount the possibility, however unlikely, of getting lucky) - if someone else here accuses me of doing so again, I might go off on them (apologies in advance). I have to chuckle though that you call my outlook "optimism" at all. I mean, relative to the catastrophe some here expect (we haven't seen anything yet), ok, but that's not exactly your typical optimism.

"From my perspective, it was rooted in the homeowner / homebuyer with dollar signs in their eyes and notions of "prices always go up, or worst-case flat" despite fundamentals."

inonada, I put most of the blame on the enablers. I can't really find the same degree of fault in wishful thinkers; of course they'd react the way they did when someone told them, "Hey, your wishes can be a reality. Just sign here."

ar, I didn't care for spunky either, and told him as much. I'm equal opportunity there; neither one is needed. The troll is a different issue altogether; if most of your posts are on RE or even issues tangential to RE, you're in a different category, even if you're acting like a ninny. I don't take any of this all that personally, trust me (despite cc's cute comment). But like I said, I take issue with the thought policing and the self-appointed "educator" persona of a few around here.

AR: I don't fault bj's - or spin's-- purchase. I bought in a down miami market in 08 and even though my recent refi appraisal came in 10% below my purchase price, I don't care. We all buy for reasons. I am happy I have my miami haven. I don't care if it loses all it's value, I am happy when I am there. (think about how your physical molecule's change when you get out of your car when you arrive at your country home). But I have planned for the real possibility of even greater loss in my property.

I believe there is a real chance for a major downturn. The more I read, the more likely it seems to me. But I don't have real interest in trying to convince anyone. I happened to be in Europe in 06 and read a financial magazine that laid out the problem in the US mortgage backed paper -- specifically explaining the rating agencies conflict of interest in putting together the tranches. When the NYTimes had it on the front page (in early 07?), I called my broker to sell all my mortgage backed securities. He thought I was an idiot because they were all triple A rated. I couldn't convince him even after a 30 min conversation and referral to said articles. When Bear Stearns had to bail out their own funds, I called him and asked him if he still thought I was wrong. He said it was an isolated event. Needless to say, he is no longer my broker. So now, I buy gold and caution my friends against the possibility of deflation or hyperinflation. How can you trust that the government will protect it's citizens when it's superior interest is to protect its own ass. Better to stay safe --even if I am wrong. And, like you, I'm alarmed at those who advocate the lack of risk.

bjw2103: "I can't really find the same degree of fault in wishful thinkers; of course they'd react the way they did when someone told them, 'Hey, your wishes can be a reality. Just sign here.'"

Stupidity and greed are not good excuses for absolving the buyers of their responsibility in creating the bubble. We are talking about "root cause" right?

inonada, re brokers should be included on the list of enablers, no?

Come on.

How long would there be drug dealers if no one wanted to take drugs?

Sunday, whoa, hold on. I'm not absolving of responsibility. There are numerous guilty parties, and I see how my initial post might make you think otherwise, but that's certainly not the case. I think it was the banks' responsibility (I mean, it's their job for crying out loud) to keep the proper barriers up. There are and have always been tons of irresponsible people who have wanted loans (practically free money in many cases), so if you want to get technical, the "root cause" is human greed. But practically speaking, I'll look at the banks for complying with these shenanigans.

Bjw: inonada, I put most of the blame on the enablers. I can't really find the same degree of fault in wishful thinkers; of course they'd react the way they did when someone told them, "Hey, your wishes can be a reality. Just sign here."

Fascinating. So a bank that gives a 20%+ down loan, let's say fixed 30-year, to a person with good credit at a debt-to-income of 25% is an enabler? If you're anything like most people in gentrified NYC, you probably fall into that category. Did you have an enabler who should be more at fault than you should things go south?

I know that might sound like a pointed question, but that's not how I'm intending them. Just asking for a little introspection.

bjw2103: "I think it was the banks' responsibility (I mean, it's their job for crying out loud) to keep the proper barriers up."

It is not the banks job to prevent people from making stupid/greedy mistakes. The "proper barriers" they put up is meant to protect the banks' depositor/investors/owners from too much risk; the banks do not work for the buyers. The banks job is to make money off the buyers. Why should the buyers expect the banks to have their interest in mind?

IMO, blame split = 51% buyers; 49% enablers listed by inonada plus re brokers

inonada, that scenario is a pretty traditional setup, no? I'm talking ninja loans here, 10% down (or less) and such. Of course you can't hold the bank accountable if you suddenly lose your job and aren't able to find one in time (though proper due diligence should take into account how much cash you have to sustain yourself in such an event); people defaulting on loans has always happened and will always happen. But when you have irresponsible lending, you're putting way more people in this pool that the system is designed to handle. That's where the blame should go. What do you think?

Sunday, it sure is the bank's job to make sure that they don't lend money to people who have little chance of paying it back.

What is the borrowers responsibility?

Ino: Want to talk about enablers? What about the Fed. Creating a multiplier effect by printing more money so banks could lend more money, manipulating credit, Greenspan removing banks reserve requirements almost entirely in the 90's.. Banks could lend out boatloads of money, which got deposited in more banks which could then lend more money. With money creation and expansion of credit, what chance did an undereducated - or greedy- borrower have? The money was there and it was being pushed on them.

Drug dealers are called pushers for a reason. They need to create the desire to create desire. Who created the desire? You didn't see people (considering the standard human deviation for greed) borrowing way, way, beyond their means in other periods of history. The effective elimination of reserve requirements created an historic anomaly. In the old axiom --- if you want to know the culprit, follow the money.

They need to create desire to create the market

"inonada, re brokers should be included on the list of enablers, no?"

Certainly, though if we take the two premises of stupidity absolving culpability and brokers in aggregate being stupider than the population at large, then they would be the least culpable?

bjw2103: "...it sure is the bank's job to make sure that they don't lend money to people who have little chance of paying it back."

I agree with that. I just disagree with why they do it. They do that to protect the banks' investors, not the borrowers. It's like a car going over the speed limit hitting a jaywalker. Sure the driver should take some blame. However, regardless of how fast the driver was going and the failure in avoiding the jaywalker does not change the fact that the jaywalker is the root cause of the crash. Sure the driver should watch out for pedestrians, but they do it to protect themselves from lawsuits and feeling bad about hurting someone else. It bothers me that people don't understand the difference.

Until people understand the difference, they will just go from one bubble to another. Tech Stock -> Real Estate -> Gold -> ???

"That's where the blame should go. What do you think?"

I hear you on irresponsible lending, blaming all the way from the buyer to the holder of the security. With a subprime ninja 0%-down option ARM with teaser rates, I put most of the blame on the holder of the mortgage (which is usually not the bank). Hell, I call the buyer a rational actor / genius. However, with a 20%+ down good-credit 30-year fixed loan at 6.5%, I put the blame on squarely on the buyer. Fortunately, most (but not all) the loses were borne according to culpability.

However, let's talk gentrified NYC. I think we agree that most loans here were "traditional" and "responsible". Even after a 20% drop, we have seen little in the way of defaults. Some submarkets saw larger drops, still little defaults. For the most parts, debt loads that could be handle by the borrowers. What about us (i.e., you): who should get the blame if / when things go south?

Demand isn't exogenous.

There's a very interesting component of drug legalization literature that talks about the role of the dealers and marketing.

Essentially, dealers do a lot of "marketing". This marketing expands consumption -- it isn't just about brand switching, this is consumption expansion marketing.

One idea is that, by decreasing transaction risk, legalization will reduce margins -- which will decrease marketing efforts by making them less profitable. (This ultimately, reduces consumption.)

So, the enablers were complicit to the extent that, because the margins in this business increase, they expanded consumption of homes. But, they were just chasing margin.

ino: if you call the buyer of a ninja loan a genius, why wouldn't you call the bank that has no reserve requirement and endless impetus to lend money. a genius for passing the risk onto the holder of the ultimate loan - the fed who will bail them out?

Apt23: as a person who played the game of RE roulette so succesfully over the past decade, I find your viewpoint comic. How much money did you make in RE vs your day job over the past decade? How many properties did you buy & sell? What was your motivation: a simple abode, or money? Yeah, I'm with you on "follow the money". I did, and on the other side I found you. ;)

"I agree with that. I just disagree with why they do it. They do that to protect the banks' investors, not the borrowers."

Sunday, totally agree. I'm not saying there's anything particularly noble about it, but that's the way the system was originally set up, and it works quite well in more "normal" circumstances.

"However, with a 20%+ down good-credit 30-year fixed loan at 6.5%, I put the blame on squarely on the buyer."

Sure, as long as the other factors checked out on the borrower as well (income, job security, credit, cash in the bank, etc.).

"I think we agree that most loans here were "traditional" and "responsible"."

I'm not totally willing to agree there actually. I think there were enough 10% down, minimal due diligence loans even here. That points more to the condo market, but coops were not (and are not) as pristine as some people think either, so I think it happened in both markets.

"Even after a 20% drop, we have seen little in the way of defaults. Some submarkets saw larger drops, still little defaults."

Don't you think that has a lot to do with the timing of government intervention aboutready and I were discussing earlier as well? I'm not saying that's the only factor, but I think it's a biggie.

"What about us (i.e., you): who should get the blame if / when things go south?"

Ok, I'll entertain the notion (though it ain't happening since I could pay off the mortgage with liquid investments right now - again, I know it's not exactly your typical sitch). I have a 30-year and bought at a time when getting a mortgage was a much different process than pre-bubble pop (it's still deflating, w67th, don't worry), so blame would really be all on me. That's the way it should be.

skinny: consumption expansion marketing

that is what i tried to say in earlier post. Fed encouraging credit expansion by lowering reserve requirements of banks is an effort to expand the market. The Fed can enhance the appearance of the economy by credit manipulation.

I am a liberal democrat. I am appalled by the ideas of Ron Paul. But we need to understand the Fed's role in what happened in the historic credit bubble during the Bush years if we are to fix this problem.

"ino: if you call the buyer of a ninja loan a genius, why wouldn't you call the bank that has no reserve requirement and endless impetus to lend money. a genius for passing the risk onto the holder of the ultimate loan - the fed who will bail them out?"

With the exception of a few banks, most of them took it in the shorts. Ask spunky about his Citi holdings. The ones that just securitized and connected borrowers with lenders, they're considered the "genius" bank, aren't they?

"With the exception of a few banks, most of them took it in the shorts. Ask spunky about his Citi holdings."

No kidding. I (stupidly) bought a few BofA shares at $15, just over 2 years ago. Fortunately not a huge loss as of now, but no one would ever call that a good investment at this point.

"Don't you think that has a lot to do with the timing of government intervention aboutready and I were discussing earlier as well? I'm not saying that's the only factor, but I think it's a biggie."

No, I think it has mainly to do with the wealth of the buying pool. Take apt23's example as case-in-point. The Miami market is down 30% from when she bought according to Case Shiller, I think. Yet her place is only down 10%. Why? Because she probably didn't buy a $150K condo. If you tracked high-end markets outside of gentrified NYC, you'd know what I'm talking about. Essentially no movement until Lehman in any of them.

Ino: Yeah, I'm with you on "follow the money". I did, and on the other side I found you. ;)

Yes. absolutely. guilty as charged and proud of it. i sold in 05 and June 07. I am right there on the other side making money with the Republicans because I may be horrified but I am not stupid. Right now I am heavily in stocks because of QE2. The govt is letting the rich people in the" know" understand that they are going to prop up the stock market so the American consumers who have been deprived of a good education will purchase their little brains out so we can support the dollar. My sweet lord, disney world had to close down because there were so many people there --look at how disney stock has risen in the past two weeks (yes, right in there in a big way, btw). And, I am about to sell 75% of stocks and hunker down with Doug Kass. (but not commodities). There will not be QE3. And what happens then to the stock market. I wont' be there to find out.

In the end, the govt is protecting it's debt. if there is a crash, even bank depositors won't be protected -- you really think the FDIC which is financed by the banks will have the money to cover if x amount of banks go down after so many bank defaults over the the last few years?

I don't care if I sound like a conspiracy nut. I have never been this outraged by our govt. What is the flip side of Tea Party? That is me. I love Obama but to me, Bill D means the rich will be protected. I am following the greedy Republican /financial guy herd.

Apt23: so what should I invest in, if I don't want to have our savings blown to smithereens. I am no gold nut, don't have much faith in the strength of the U.S. dollar, scared of munis (though I own some not through funds).

Ino:he Miami market is down 30% from when she bought according to Case Shiller, I think. Yet her place is only down 10%. Why? Because she probably didn't buy a $150K condo.

Well I bought from someone who defaulted on their loan so it was down 15% when I bought, it is now down another 10% so pretty much in line with Case/Schiller. And yes between 1.5 and 2MM. But believe me, those who bought in this price range are plenty nervous.

nyc10023: I like to think I am good with RE but I am no financial genius by any means. Ino is the financial dude. But if you want to be scared straight read Robert Prechter's Conquer the Crash. I don't think there will be deflation -- Prechter's theory-- but I do believe in being safe so I re-read the book to find some ideas. I like the idea of short term investment in currencies and bonds of "safe" countries like Swiss francs and Singapore. I am looking for the right "bear" manager. I have never invested with a bear manager ever so it is taking me some time to find one. And yes, count me in as a gold bug. I lived overseas my whole life and whether or not govt's depend on gold -- their populaces love it -- think India where the women are living bank accounts --wearing the families entire wealth in gold bands sealed on their ankles. And Chinese citizens, as of a few months ago, are allowed to buy gold for the first time. Read Dennis Gartner/commodities guy on Gold.

btw, just sold the last of my munis based on my broker's recommendation. He has never asked me to sell anything. And this was before meredith whitney's call.

Apt23,

Maybe I should give you some money to run? I'm so far from the herd in temperament that I have no hope of guessing its movement, but you seem to be in that sweet spot of understanding the herd yet not being part of it. The vaquero, let's say.

On Miami, Case-Shiller has the peak in 2006 at a level of 280. 2008 started at 225, hit 186 in July, and finished at 165. It is now at 144. The broad market is down 50% from the peak, 30% from when you bought (I put you at first half 2008). If I'm reading you correctly, your segment is down only 25% from the peak, 10% since you bought, right? Or am I misunderstanding?

I know those who bought in your price range are plenty nervous. But they're mostly paying, aren't they?

Err, vaquera, I should say.

Ino: If you want to see vaqueras you should come down here to Miami and see the women emerging from cars during Art Basel at the Fountainbleu. Vaqueras in Louboutin thigh high boots disgorging from vehicles in the manner of clown cars in the circus. Amazing spectacle.

As for the markets, you are the money guy, not me. I only go with the flow. I am a flow groupie. But I have lost my nerve and will bail soon. Maybe tomorrow. Especially since I just read this: http://www.cnbc.com/id/40989690. My last groupie conquest was when I was watching CNBC and a hedge fund manager (the name escapes me at the moment) was on TV even though he never submits to interviews to say the Fed was saying you can't lose money in stocks now -- the purpose of QE2. He was basically saying that he had bought immediately and waited for the upturn but the idiot fund managers didn't respond. He was on TV to say Wake The F'k Up. I understood the message and bought big that day as did many idiot fund managers not possessed of the hedgies acumen but more than willing to do his bidding. And it went up huge that day and virtually every day since. Flow Groupie.

Re: Miami. I bought in July 08 - a distressed property. My building is 97% sold (70% when I bought) and we have only 2 short sales at very lower end. My neighbors who bought pre sales are down significantly. Buyers who bought after me are sweet. Things are not great but the Miami market is so very interesting. Miami does not feel like an American city. For good reason --sales are all targeted to foreigners. And it is working. Sales have picked up in the last 2 quarters. But Not enough to cover the massive foreclosure tsunami that is about to hit the overwhelmed courts. This latest foreclosure ruling in MA will affect the market here and slow it down.

Come down and look for property. It is a sweet life. An interesting investment. Where else can you see Russians oligarchs vie for property against the South American overlords. Well, except NYC.

>bj: you are not doing yourself any favors here. why don't you do some reading on the cause of the bubble as you don't seem to have a handle on it. Nouriel Roubini was a virtual unknown outside of small economist circles until his dire predictions came to pass.

And he was telling people to continue to sell equities in March 2009.

>Why don't you read some Marc Faber, Robert Prechter, Peter Schiff, etc --- not because they are right in their predictions (that is so far, unknown) but because these are educated men presenting the absolute worst case scenarios backed by critical thinking. They are uber bears, extremists really. Many wise souls believe they are absolutely wrong (be careful of those who have a vested interest in silencing them). But as an investor, a homeowner, a citizen it is probably a good thing to hear the worst case. Most importantly it would lay out some reasons to be concerned and it would show that W67 is, in comparison, a cock-eyed optimist.

What could possibly be the upside about worrying every day that there is a possibility of a nuclear war or some other destruction of NYC?

>Ino: Want to talk about enablers? What about the Fed. Creating a multiplier effect by printing more money so banks could lend more money, manipulating credit, Greenspan removing banks reserve requirements almost entirely in the 90's.. Banks could lend out boatloads of money, which got deposited in more banks which could then lend more money.

The solution is no Fed and no multiplier effect? Sticks, stones and fire?

>With money creation and expansion of credit, what chance did an undereducated - or greedy- borrower have? The money was there and it was being pushed on them.

Seriously?

>Drug dealers are called pushers for a reason. They need to create the desire to create desire. Who created the desire? You didn't see people (considering the standard human deviation for greed) borrowing way, way, beyond their means in other periods of history.

Everything was great in the world for thousands of years until just the past 10 years? People weren't greedy until recently?

>The effective elimination of reserve requirements created an historic anomaly.

The incidence of historic anomalies is not anomalous. Each historical anomaly may be distinct, but historic anomalies are not rare.

>In the old axiom --- if you want to know the culprit, follow the money.

>I remember when I was a very young child, my father had a running battle with his cousin, a medical research scientist who thought my father was an idiot to smoke cigarettes. My father argued that there was no conclusive proof that cigs caused death and even so, it was his life/his choice. Cuzin argued that there indeed was conclusive proof but it could not reach the public because all the dollars my father spent on cigs went to advertising which perpetuated a mass delusion and to lobbyists who bought off the govt so the truth could not reach the public. I will always remember that cousin saying to my father every time he lit up -- "With that match, you contribute to the death of millions"
>I think that posters on this site get frustrated because they are convinced that there is enormous risk in the economy and continued risk in RE. When some posters give circumscribed points of view (in my neighborhood, in my building, this month, etc) it moves the argument from the larger, treacherous picture and perpetuates an illusion that everything is just fine. Which happens to be a point of view critical to our govt -- they need to keep prices up so banks don't collapse, so Treasuries and the dollar don't implode, so we don't fall into a deflationary cycle. Our govt, and bank lobbyists are on the same page -- they have a vested interest in keeping up the ruse that everything will work out fine. Perhaps it will -- but the Fed and the banks are sailing in waters that have never, ever been navigated before. Let's hope they make it to the shore.
>In the meantime, as an individual, I think it unwise to posit that there could not be a serious downturn from here. No one can know that because we have never faced these economic circumstances before. It might be your opinion, but in these times, it should be backed up by serious macro economic facts. If the general community on this board let unsubstantiated opinions pass without scrutiny we might all be complicit in the economic demise of others. So by all means, give vent to your opinions but I think you should expect - and welcome- those opinions to be challenged.

Holy Shit. Talk about thought police.
You aren't even allowed to have an opinion that differs from the majority unless you have "serious macro economic facts". Buying real estate is akin to marketing cigarettes. People will be destroyed as a result of YOUR purchase, or even just recommending a purchase, or even just saying that the market won't go down.
Real Estate Amber Alert!

"you should buy a house now, if you have one by a second one, if you have 2 give some money to your friends so they can buy one".
Paulson, speech at columbia U, nov 2010. Paulson made 7b shorting RE in 2005-6.

>As for the markets, you are the money guy, not me. I only go with the flow. I am a flow groupie. But I have lost my nerve and will bail soon. Maybe tomorrow. Especially since I just read this:

How does this reconcile with your thought-police position that there is only one allowed point of view on real estate?

> SWE, you are a no-good market timer, and you will be held accountable at the pearly gates
> of "valuations don't matter, it'll always eventually go up".

Ha. Yeah, I'm mostly anti stock-picking for individuals (you not a lot of time and information you probably don't have) but fear and stupidity move much more slowly and obviously, so whole market picks are easier in my book.

> Seriously tough, what fraction of your net worth was in the market in 2009/2010/present? Count
> things like SSO as 1.66x given the higher leverage.

When dow was 14k, I was maybe 40-50% in (no stroke of genius, I just happened to have put good money away at that time, and wasn't ready to sink it all in), and starting buying on the dips. At about 12,500 I moved a lot more in, up to about 60-70 in. Then came hell... I kept buying on the way down. In the 6-7-8s, I was right about 100% if you factor in the SSOs. I noted as such on this board. I've taken profits on the way up, and put more money away, so down to 80% now.

> there is no thought police here.
> everyone is entitled to their opinion.
> you seem to want it both ways.

true...

Thanks for the candid answer, SWE.

No prob, I've always respected your postings, and your questions were fair given the material being discussed.

"I am however, also very wary of people who go out of their way to try to "educate" others and belittle opposing viewpoints (in a vulgar manner no less), all in the supposed name of a "greater good."

Funny, the biggest complaints always seem to be coming from those most guilty of what they are complaining about...

"Funny, the biggest complaints always seem to be coming from those most guilty of what they are complaining about..."

swe, funny indeed coming from you. But seriously, show me where I'm trying to browbeat others with my point of view and I'll agree with you. Otherwise, your comment is indeed hypocritical.

The dream police, they live inside of my head.
The dream police, they come to me in my bed.
The dream police, they're coming to arrest me, oh no.

You know that talk is cheap, and those rumors ain't nice.
And when I fall asleep I don't think I'll survive the night, the night.

'Cause they're waiting for me.
They're looking for me.
Ev'ry single night they're driving me insane.
Those men inside my brain.

I could not resist

I like that better than the thought police

Yeah 1979!
Cheap trick!
I want you to want me!

Mortgage rate 18%

Can we be explicit? How many decades, and recover to what point? 2007 or today?

nice, falco.

swe, nothing then? That was fun while it lasted.

huntersburg, look at the original piece - they are projecting a return to nominal peak prices (that would be late 07 in my book) by 2021. As stated before, I don't think that's nearly as bearish as some might think.

she wants more....and more....and more

get some teamwork for chrissakes