Author Topic: The Great Crash 10 Years Later  (Read 2524 times)

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Offline irvinehomeowner

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The Great Crash 10 Years Later
« on: October 10, 2018, 02:41:56 PM »
Someone refresh my memory, when many were predicting the housing crash, I don't recall many predicting the stock market crash.

I always wondered if this was a chicken/egg thing.

If the stock market didn't crash in 08, would housing have stabilized without the Fed lowering interest rates? Or would housing prices fallen even further without the lower rates?

And I'm not sure if I remember this right, but wasn't the previous housing crash (early 90s) tied to the DotCom burst?

Hindsight is 20/20... and history repeats itself.

Is the market going to take a fall again (I hear ads on the radio from people wanting you to diversify)? Since many think we are the end of a price run up (or what others would call a bubble), what would it take to make a real slowdown happen?

The stock poll looks positive and the housing poll is only slightly negative... so anyone want to Larry it up and predict where we are going?
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Offline rickr

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Re: The Great Crash 10 Years Later
« Reply #1 on: October 10, 2018, 02:43:48 PM »
I have officially shorted the S&P 2 weeks ago. Purchased SH and gonna hold on for the ride down.

Offline Ready2Downsize

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Re: The Great Crash 10 Years Later
« Reply #2 on: October 10, 2018, 03:45:37 PM »
Someone refresh my memory, when many were predicting the housing crash, I don't recall many predicting the stock market crash.

I always wondered if this was a chicken/egg thing.

If the stock market didn't crash in 08, would housing have stabilized without the Fed lowering interest rates? Or would housing prices fallen even further without the lower rates?

And I'm not sure if I remember this right, but wasn't the previous housing crash (early 90s) tied to the DotCom burst?

Hindsight is 20/20... and history repeats itself.

Is the market going to take a fall again (I hear ads on the radio from people wanting you to diversify)? Since many think we are the end of a price run up (or what others would call a bubble), what would it take to make a real slowdown happen?

The stock poll looks positive and the housing poll is only slightly negative... so anyone want to Larry it up and predict where we are going?

The dot.com bust was in 2000, not in the 90's and houses went UP at that time not down. Greenspan kept lowering rates in attempt to stop the stock market crash but it didn't really help much.


Stock market crash of Oct. 1987 didn't coincide with housing going down either. That market peaked in mid 1989 at which times stocks had bottomed out and were recovering.

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Offline Compressed-Village

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Re: The Great Crash 10 Years Later
« Reply #3 on: October 11, 2018, 07:01:29 AM »
Someone refresh my memory, when many were predicting the housing crash, I don't recall many predicting the stock market crash.

I always wondered if this was a chicken/egg thing.

If the stock market didn't crash in 08, would housing have stabilized without the Fed lowering interest rates? Or would housing prices fallen even further without the lower rates?

And I'm not sure if I remember this right, but wasn't the previous housing crash (early 90s) tied to the DotCom burst?

Hindsight is 20/20... and history repeats itself.

Is the market going to take a fall again (I hear ads on the radio from people wanting you to diversify)? Since many think we are the end of a price run up (or what others would call a bubble), what would it take to make a real slowdown happen?

The stock poll looks positive and the housing poll is only slightly negative... so anyone want to Larry it up and predict where we are going?

I think sell off is in effect for profit taking. People then stash it under mattresses or put it in a safe low yield saving accounts now that rates has some earning. Then wait for potential deals ahead. In the end real assets is better to hold than some numbers on some accounts. At least you can feel it, touches it and / or live in it.

Offline fortune11

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Re: The Great Crash 10 Years Later
« Reply #4 on: October 11, 2018, 07:47:43 AM »
Someone refresh my memory, when many were predicting the housing crash, I don't recall many predicting the stock market crash.

I always wondered if this was a chicken/egg thing.

If the stock market didn't crash in 08, would housing have stabilized without the Fed lowering interest rates? Or would housing prices fallen even further without the lower rates?

And I'm not sure if I remember this right, but wasn't the previous housing crash (early 90s) tied to the DotCom burst?

Hindsight is 20/20... and history repeats itself.

Is the market going to take a fall again (I hear ads on the radio from people wanting you to diversify)? Since many think we are the end of a price run up (or what others would call a bubble), what would it take to make a real slowdown happen?

The stock poll looks positive and the housing poll is only slightly negative... so anyone want to Larry it up and predict where we are going?

I think sell off is in effect for profit taking. People then stash it under mattresses or put it in a safe low yield saving accounts now that rates has some earning. Then wait for potential deals ahead. In the end real assets is better to hold than some numbers on some accounts. At least you can feel it, touches it and / or live in it.

Yes . Real estate is among the most versatile assets — broad range of utility — can be lived in , can generate income when needed , can provide collateral when needed , can be used to show off to your friends when needed

Try doing all that w gold . Or with stocks .

That versatility in and of itself creates an option value which markets miss.

Disclaimer — this is NOT a comment on the attractiveness of the RE market valuations at this particular point in time , more of a general , “structural “ , argument

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Offline woodburyowner

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Re: The Great Crash 10 Years Later
« Reply #5 on: October 11, 2018, 09:32:34 AM »
Yes . Real estate is among the most versatile assets — broad range of utility — can be lived in , can generate income when needed , can provide collateral when needed , can be used to show off to your friends when needed

Try doing all that w gold . Or with stocks .

With smartphones, social media, and financial apps these days it's very easy to show off your portfolio to friends and strangers.  Some apps even have a "balance peek" option where the balance shows without having to login!  ;)

Offline fortune11

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Re: The Great Crash 10 Years Later
« Reply #6 on: October 11, 2018, 10:20:51 AM »
Yes . Real estate is among the most versatile assets — broad range of utility — can be lived in , can generate income when needed , can provide collateral when needed , can be used to show off to your friends when needed

Try doing all that w gold . Or with stocks .

With smartphones, social media, and financial apps these days it's very easy to show off your portfolio to friends and strangers.  Some apps even have a "balance peek" option where the balance shows without having to login!  ;)

Agree.  Hell , people show off their portfolios on TI — only the successes , mind you :)   

Offline irvinehomeowner

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Re: The Great Crash 10 Years Later
« Reply #7 on: October 11, 2018, 10:49:38 AM »

The dot.com bust was in 2000, not in the 90's and houses went UP at that time not down. Greenspan kept lowering rates in attempt to stop the stock market crash but it didn't really help much.


Stock market crash of Oct. 1987 didn't coincide with housing going down either. That market peaked in mid 1989 at which times stocks had bottomed out and were recovering.

Thanks for the history clarification R2D.

Anything beyond 20 years all happened at the same time to me. :)

So when the 90s real estate pop happened... was there any other event? If I recall (which now is suspect), interest rates were pretty high... did the drop cause rates to fall (I think they did... obv not to current levels)?
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Offline morekaos

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Re: The Great Crash 10 Years Later
« Reply #8 on: October 11, 2018, 11:10:40 AM »
The 90's RE crash coincided with the Junk bond crash and the Savings and loan crash.  Both paralleled our recent financial crash.  Then the government created the Resolution Trust Corp that our most recent Troubled Asset Relief program paralleled and put in the bottom needed to fuel our new recovery and boom...it'll all happen again, it is our destiny.



https://youtu.be/G6b5ubvfa3I

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Offline irvinehomeowner

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Re: The Great Crash 10 Years Later
« Reply #9 on: October 11, 2018, 11:37:50 AM »
Thanks morekaos... I thought there was something else around that time.
Once you go 3-car garage... your junk can never go back.
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Offline lnc

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Re: The Great Crash 10 Years Later
« Reply #10 on: October 11, 2018, 11:41:58 AM »
So when the 90s real estate pop happened... was there any other event? If I recall (which now is suspect), interest rates were pretty high... did the drop cause rates to fall (I think they did... obv not to current levels)?

IIRC, there was a recession and housing market took a hit. 

And the mortgage was indeed high.  I bought my first home in '94 and my rate was 9.5%.


 

Offline fortune11

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Re: The Great Crash 10 Years Later
« Reply #11 on: October 11, 2018, 12:19:44 PM »
There is correlation and there is causation

Correlation means when a bunch of different things happen at the same time - real estate slowing down, corporate bond market selling off , increase in defaults . Same as the saying “misery loves company “ . This is essentially what historical financial analysis of markets gives you and what 99 percent of supposed economics and financial experts make their living off of


Causation is when you can link certain pieces together — and say that “x happened alongside y AND x caused y “ . This is much much harder to prove . This is why economics is not really a science unlike physics or math where laws of thermodynamics work in every single instance and very predictably

My goal is not to sermonize here — but Steve Jobs once famously said - you cannot connect the dots looking forward , can only connect the dots in hindsight .

Maybe you can . But it is Damn hard connecting dots in hindsight when it comes to finance and economics

Certain obvious truths are

Leverage is a self fulfilling cycle

When the monetary authority drains liquidity , something always breaks

Reserve currency status (which is the dollar)  means a whole LOT

A move towards insular markets (less trade ) may boost short  term prospects but is always productivity destroying a few years out



Offline Mety

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Re: The Great Crash 10 Years Later
« Reply #12 on: October 11, 2018, 03:08:15 PM »
So when the 90s real estate pop happened... was there any other event? If I recall (which now is suspect), interest rates were pretty high... did the drop cause rates to fall (I think they did... obv not to current levels)?

IIRC, there was a recession and housing market took a hit. 

And the mortgage was indeed high.  I bought my first home in '94 and my rate was 9.5%.

Just out of curiosity, for 9.5% rate with '94' home prices, how much was the mortgage monthly payment at that time?

#fepo

Offline lnc

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Re: The Great Crash 10 Years Later
« Reply #13 on: October 11, 2018, 06:58:37 PM »
So when the 90s real estate pop happened... was there any other event? If I recall (which now is suspect), interest rates were pretty high... did the drop cause rates to fall (I think they did... obv not to current levels)?

IIRC, there was a recession and housing market took a hit. 

And the mortgage was indeed high.  I bought my first home in '94 and my rate was 9.5%.
Just out of curiosity, for 9.5% rate with '94' home prices, how much was the mortgage monthly payment at that time?

Around $1800 for $210k mortgage.  $1800 was not much by today’s standard but that was a big deal for me back in 1994 and I was just started working with a tiny starting salary. 

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Offline Compressed-Village

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Re: The Great Crash 10 Years Later
« Reply #14 on: October 11, 2018, 10:32:19 PM »
So when the 90s real estate pop happened... was there any other event? If I recall (which now is suspect), interest rates were pretty high... did the drop cause rates to fall (I think they did... obv not to current levels)?

IIRC, there was a recession and housing market took a hit. 

And the mortgage was indeed high.  I bought my first home in '94 and my rate was 9.5%.
Just out of curiosity, for 9.5% rate with '94' home prices, how much was the mortgage monthly payment at that time?

Around $1800 for $210k mortgage.  $1800 was not much by today’s standard but that was a big deal for me back in 1994 and I was just started working with a tiny starting salary.

In 1999, I had a mortgage of 270K @ 8.75 my mortgage was 2200 with no PMI, I nearly faint when signing my mortgage shackles Imagine that.

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