Awgee's Article on the DoctorHousingBubble

PANDA_IHB

PANDA_IHB

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<img src="http://www.doctorhousingbubble.com/wp-content/uploads/2009/09/case-shiller-futures.jpg" alt="" />



I found this graph to be very interesting. Here it shows that the bottom is in at May, 2011 which should be around May 2003 levels. I checked IPO's report at it shows that the index is around 152 for homes sold around May 2003. Does anybody know what ppsf homes in Irvine were selling for around May 2003? For some weird reason, this graph seems realistic to me.
 
I think the question here is do we really think May 03 is the stick by which we should measure the bottom? Fundamentally, prices were still high in 2003.
 
Until interest rates have gone through a full cycle and we see the peak for the next expansion, I doubt we will be at the bottom. The only way that bottom is maintained is if interest rates creep up slowly.
 
I have a feeling that the interest rates are going to rise very soon here to fight inflation and high commodity prices. Look at how much the dollar has lost its purchaseing power from beginning of '09 until now.
 
[quote author="PANDA" date=1252458089]I have a feeling that the interest rates are going to rise very soon here to fight inflation. Look at how much the dollar has lost its purchaseing power from beginning of '09 until now.</blockquote>


I doubt it. The Fed will keep interest rates near zero until inflation is very significant, which also won't happen any time soon. Inflation is currently near zero as well.



Long term, maybe. But short to medium term, interest and inflation rates will be very low. Short to medium term, deflation is more likely than significant inflation.
 
If you assume the graph is reasonable, this assumes the bubble pricing will go on forever. If that is true, it will NEVER be advantageous to own property vs renting on a cash vs cash basis.



<blockquote>This home according to the $390/per square foot price would sell for $404,820. There is a big difference between $3,276 a month and $2,150 a month. And that is the disconnect. Until these markets reach more realistic valuations, the bubble will continue. Yes, owning a home will always be more expensive than renting but by how much?</blockquote>


And equally insane is holding property for rental income when they could simply sell it and go do something else, particularly when looking at cap rates vs todays sales prices. I know I?ve told this story a million times, but I?m going to do it again. My current landlord could of unloaded the home I rent for $675K three years ago. Today he?d be lucky to get $325K. He traded roughly $75K in income for $350K in capital depreciation. What he should of done was sold and pay the tax ? and in an effort to avoid the tax, he cost himself substantially more.



Did you notice this chart?



<img src="http://www.doctorhousingbubble.com/wp-content/uploads/2009/09/1975-05_medianus.gif" alt="" />



Don't fight the tape, kid.
 
[quote author="PANDA" date=1252458089]I have a feeling that the interest rates are going to rise very soon here to fight inflation and high commodity prices. Look at how much the dollar has lost its purchaseing power from beginning of '09 until now.</blockquote>


Why would you think that? Because gold has blown through $1000 an ounce? I can give you a laundry list of comodities I follow that are in the toilet. Stuff you use.



<a href="http://www.indexmundi.com/commodities/?commodity=agricultural-raw-materials-price-index&months=120">Commodity Agricultural Raw Materials Index Monthly Price</a>



<blockquote>Sep 1999 - Jul 2009: 0.157 (0.16 %)</blockquote>


There. Is. No. Inflation. Too. Speak. Of. But there is an assload of excess capacity.
 
[quote author="PANDA" date=1252457748]IHO, do you remember what average ppsf SFRs were selling at that time? Were they about $280?</blockquote>
According to Zillow... about $272.
 
[quote author="irvine_home_owner" date=1252460225][quote author="PANDA" date=1252457748]IHO, do you remember what average ppsf SFRs were selling at that time? Were they about $280?</blockquote>
According to Zillow... about $272.</blockquote>


That would put a 2500 sq ft SFR in Irvine about $680,000 which seems right to me where the bottom would be. Give or take $30k.
 
[quote author="no_vaseline" date=1252459987][quote author="PANDA" date=1252458089]I have a feeling that the interest rates are going to rise very soon here to fight inflation and high commodity prices. Look at how much the dollar has lost its purchaseing power from beginning of '09 until now.</blockquote>


Why would you think that? Because gold has blown through $1000 an ounce? I can give you a laundry list of comodities I follow that are in the toilet. Stuff you use.



<a href="http://www.indexmundi.com/commodities/?commodity=agricultural-raw-materials-price-index&months=120">Commodity Agricultural Raw Materials Index Monthly Price</a>



<blockquote>Sep 1999 - Jul 2009: 0.157 (0.16 %)</blockquote>


There. Is. No. Inflation. Too. Speak. Of. But there is an assload of excess capacity.</blockquote>


Novas, the problem is that I don't believe in the inflation numbers that are published.
 
[quote author="PANDA" date=1252460749][quote author="no_vaseline" date=1252459987][quote author="PANDA" date=1252458089]I have a feeling that the interest rates are going to rise very soon here to fight inflation and high commodity prices. Look at how much the dollar has lost its purchaseing power from beginning of '09 until now.</blockquote>


Why would you think that? Because gold has blown through $1000 an ounce? I can give you a laundry list of comodities I follow that are in the toilet. Stuff you use.



<a href="http://www.indexmundi.com/commodities/?commodity=agricultural-raw-materials-price-index&months=120">Commodity Agricultural Raw Materials Index Monthly Price</a>



<blockquote>Sep 1999 - Jul 2009: 0.157 (0.16 %)</blockquote>


There. Is. No. Inflation. Too. Speak. Of. But there is an assload of excess capacity.</blockquote>


Novas, the problem is that I don't believe in the inflation numbers that are published.</blockquote>


Great, because I didn't post inflation numbers. I posted commodity indexes. If the inflation number that you don't believe was understated, you would see it reflected in the above index. And it's not there!



And when I see articles like this:



<a href="http://www.foodchannel.com/stories/1716-lobster-now-cheaper-than-hot-dogs-">http://www.foodchannel.com/stories/1716-lobster-now-cheaper-than-hot-dogs-</a>



<blockquote>Looking for a bargain food to grill at your next backyard barbecue? Try <strong>Maine lobster. Per pound it?s less expensive than hotdogs right now</strong>, according to lobster boat captain Mike Dassatt, who fishes the coast near Belfast, Maine. Dassatt is quoted in an article for cnnmoney.com by Jon Birger.</blockquote>


it doesn't make me believe the Gold Bugs any more than I did before. Why would I? The only commodities that are going up are stuff that people are "high frequency trading" or whatever the Chinese feel like hoarding today. Everything else is squarely on it's ass.



It's moments like this I'm really mad that Zoval deleted the posts I did for Got Milk? who believed the same fairy tail you do. If my tone is insulting, I apologize, but there is no dataset that I'm aware of that supports your position (outside of looking at gold and oil and whatever China decides to horde today).
 
[quote author="Geotpf" date=1252458589][quote author="PANDA" date=1252458089]I have a feeling that the interest rates are going to rise very soon here to fight inflation. Look at how much the dollar has lost its purchaseing power from beginning of '09 until now.</blockquote>


I doubt it. The Fed will keep interest rates near zero until inflation is very significant, which also won't happen any time soon. Inflation is currently near zero as well.



Long term, maybe. But short to medium term, interest and inflation rates will be very low. Short to medium term, deflation is more likely than significant inflation.</blockquote>
100% agree with Geotpf, what I read/understand from FED statements is exactly that, will keep interest rates lower tahn they should for an extended period of time.
 
[quote author="no_vaseline" date=1252462544][quote author="PANDA" date=1252460749][quote author="no_vaseline" date=1252459987][quote author="PANDA" date=1252458089]I have a feeling that the interest rates are going to rise very soon here to fight inflation and high commodity prices. Look at how much the dollar has lost its purchaseing power from beginning of '09 until now.</blockquote>


Why would you think that? Because gold has blown through $1000 an ounce? I can give you a laundry list of comodities I follow that are in the toilet. Stuff you use.



<a href="http://www.indexmundi.com/commodities/?commodity=agricultural-raw-materials-price-index&months=120">Commodity Agricultural Raw Materials Index Monthly Price</a>



<blockquote>Sep 1999 - Jul 2009: 0.157 (0.16 %)</blockquote>


There. Is. No. Inflation. Too. Speak. Of. But there is an assload of excess capacity.</blockquote>


Novas, the problem is that I don't believe in the inflation numbers that are published.</blockquote>


Great, because I didn't post inflation numbers. I posted commodity indexes. If the inflation number that you don't believe was understated, you would see it reflected in the above index. And it's not there!



And when I see articles like this:



<a href="http://www.foodchannel.com/stories/1716-lobster-now-cheaper-than-hot-dogs-">http://www.foodchannel.com/stories/1716-lobster-now-cheaper-than-hot-dogs-</a>



<blockquote>Looking for a bargain food to grill at your next backyard barbecue? Try <strong>Maine lobster. Per pound it?s less expensive than hotdogs right now</strong>, according to lobster boat captain Mike Dassatt, who fishes the coast near Belfast, Maine. Dassatt is quoted in an article for cnnmoney.com by Jon Birger.</blockquote>


it doesn't make me believe the Gold Bugs any more than I did before. Why would I? The only commodities that are going up are stuff that people are "high frequency trading" or whatever the Chinese feel like hoarding today. Everything else is squarely on it's ass.



It's moments like this I'm really mad that Zoval deleted the posts I did for Got Milk? who believed the same fairy tail you do. If my tone is insulting, I apologize, but there is no dataset that I'm aware of that supports your position (outside of looking at gold and oil and whatever China decides to horde today).</blockquote>
I agree 100%...look at nat gas...it is making new lows on a weekly basis. The reason that oil is going nuts is because it's the flavor of the month for speculator and Goldman to churn and burn more profits like they did last summer. The reason certain commodities prices are rising are due to the dollar doing down the toilet because there's a lot of excess output capacity out there. As long as excess capacity remains at its current levels, you won't see inflation go out of control.
 
<em>"I read some recent studies regarding the predictive power of pari-mutuel type betting. Perhaps IHB can put together a system to wager on home prices. It might serve as a means to distill the expectations for home prices into a quantity. "</em> - CapitalismWorks



It already exists in the form of the housing futures market. Check out the graph at the beginning of this thread.
 
[quote author="no_vaseline" date=1252459987][quote author="PANDA" date=1252458089]I have a feeling that the interest rates are going to rise very soon here to fight inflation and high commodity prices. Look at how much the dollar has lost its purchaseing power from beginning of '09 until now.</blockquote>


Why would you think that? Because gold has blown through $1000 an ounce? I can give you a laundry list of comodities I follow that are in the toilet. Stuff you use.



<a href="http://www.indexmundi.com/commodities/?commodity=agricultural-raw-materials-price-index&months=120">Commodity Agricultural Raw Materials Index Monthly Price</a>



<blockquote>Sep 1999 - Jul 2009: 0.157 (0.16 %)</blockquote>


There. Is. No. Inflation. Too. Speak. Of. But there is an assload of excess capacity.</blockquote>


Hell, why not use the 20 year graph to prove that prices never go up? My gas and food expenditures tell me otherwise - it trends up long term.

Increased money supply is inflation

Cheap money is inflation.

Declining dollar is the result of inflation

Gold/silver rising is the result of inflation

Rising prices are the result of inflation

Inflation is here right now. The results are coming.

It's like failing math and not getting an ass whooping because the report card hasn't shown up in the mailbox yet.

Prices in the toilet are temporary and mean BUY.

If deflation were really here (yes we are in a deflationary environment economically speaking), prices would be falling much further and citizens would benefit.

I don't really see or feel this benefit in the price I pay for stuff. Some things went down, some up, some stayed the same.

Also, if prices remain constant but quality/size/weight suffers, is that not inflation?

If prices go down but should be going down further, is that not inflation?



All the arguments against inflation are short-sighted and temporary. If you believed your argument, you would be stockpiling dollars and benefitting. Let me know how that turns out fellas.
 
Thanks matt, you have taken the words out of my mouth. I have completely given up on novas, therefore too lazy to post a response.
 
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