Political Crossfire Forums

[beachbum bob]

unfortunate to those that paid "full price" last year...they just got screwed big time....and the greed in the housing industry fully revealed.....
what bubble...??
and prices neve go down....rightttt



http://housingpanic.blogspot.com/

[Free Thinkr]

beachbum bob wrote: unfortunate to those that paid "full price" last year...they just got screwed big time....and the greed in the housing industry fully revealed.....
Who in the housing industry, specifically, is "greedy?"

[chris_mthomas]

Well, I'm glad that the Fed popped the bubble now instead of later. A more competent chairman would have raised interest rates before the housing speculation got so bad, but there's nothing Bernake can do about it now.

I think you're right: I think a housing-led slowdown is no doubt occurring. I'm not sure if the economy will sink into recession or not, but growth will continue to sputter.

Quote: unfortunate to those that paid "full price" last year...they just got screwed big time....and the greed in the housing industry fully revealed.....
what bubble...??
and prices neve go down....rightttt
I'm not sure if anyone in their right mind was saying that there wasn't a housing bubble, just wondering how big it was and how painful it would be when it popped. But this isn't indicative of "greed in the housing industry", just of the speculative nature of markets. When banks are giving out loans that the lender doesn't have to pay principle on, simply in the hopes that the value of the real estate would rise, you know that something's messed up in the market. The combined effect of the Fed's low interest rates and China's currency peg made the American mortgage industry's rates dangerously low. And now we're seeing the consequences.

[Gus]

My sis just got married and is looking at moving into a house. It's not bad news for everyone.

[bob.appleyard]

Gus wrote: My sis just got married and is looking at moving into a house. It's not bad news for everyone.

Okay, you can do it this time. Next time a "oh noes housing bubble burst, everyone's gonna die" thread pops up, I'll do it. Deal?

[Free Thinkr]

chris_mthomas wrote: But this isn't indicative of "greed in the housing industry", just of the speculative nature of markets.
Ahhhhh. 8:)

[ubikk]

New home sales actually rose a little bit in August, and surprised investors:

CITE (from Bloomberg)

My theory is that there is some pent-up demand by people waiting to buy. I wonder how much remains?

However, existing home sales continue to plummet and housing starts are nowhere near what they've been in recent years.

[ubikk]

Free Thinkr wrote: chris_mthomas wrote: But this isn't indicative of "greed in the housing industry", just of the speculative nature of markets.
Ahhhhh. 8:)

hehe, what drives speculation? Greed!

[Free Thinkr]

ubikk wrote: Free Thinkr wrote: chris_mthomas wrote: But this isn't indicative of "greed in the housing industry", just of the speculative nature of markets.
Ahhhhh. 8:)

hehe, what drives speculation? Greed!
But it's not in the hoouuusssing industry. It's not in industry at all, in fact.

[beachbum bob]

Free Thinkr wrote: beachbum bob wrote: unfortunate to those that paid "full price" last year...they just got screwed big time....and the greed in the housing industry fully revealed.....
Who in the housing industry, specifically, is "greedy?"

see..now...a builder can drop a price 30%...must be some "greed" in that price somewhere..especially with the pay they are giving to the illegal workers

[beachbum bob]

ubikk wrote: New home sales actually rose a little bit in August, and surprised investors:

CITE (from Bloomberg)

My theory is that there is some pent-up demand by people waiting to buy. I wonder how much remains?

However, existing home sales continue to plummet and housing starts are nowhere near what they've been in recent years.

August report is the third weakess in the past 3 yrs...and was off almost 18% from a year ago...and the selling price was down nearly 1.5% and inventories up nearly 20% nationwide from a year earlier.....

[Free Thinkr]

beachbum bob wrote: Free Thinkr wrote: beachbum bob wrote: unfortunate to those that paid "full price" last year...they just got screwed big time....and the greed in the housing industry fully revealed.....
Who in the housing industry, specifically, is "greedy?"

see..now...a builder can drop a price 30%...must be some "greed" in that price somewhere..especially with the pay they are giving to the illegal workers
Builders can't drop a price 30%.

[beachbum bob]

Free Thinkr wrote: beachbum bob wrote: Free Thinkr wrote: beachbum bob wrote: unfortunate to those that paid "full price" last year...they just got screwed big time....and the greed in the housing industry fully revealed.....
Who in the housing industry, specifically, is "greedy?"

see..now...a builder can drop a price 30%...must be some "greed" in that price somewhere..especially with the pay they are giving to the illegal workers
Builders can't drop a price 30%.

well they did...DR Horton did in Florida...as per the flyer...

[ubikk]

Free Thinkr wrote: ubikk wrote: Free Thinkr wrote: chris_mthomas wrote: But this isn't indicative of "greed in the housing industry", just of the speculative nature of markets.
Ahhhhh. 8:)

hehe, what drives speculation? Greed!
But it's not in the hoouuusssing industry. It's not in industry at all, in fact.

OK then, the real estate speculation industry.

[Free Thinkr]

ubikk wrote: Free Thinkr wrote: ubikk wrote: Free Thinkr wrote: chris_mthomas wrote: But this isn't indicative of "greed in the housing industry", just of the speculative nature of markets.
Ahhhhh. 8:)

hehe, what drives speculation? Greed!
But it's not in the hoouuusssing industry. It's not in industry at all, in fact.

OK then, the real estate speculation industry.
*ding* *ding* *ding*

Give this man a prize!

---------------------------------------------------------------------------------------------------------
30% Bob? Those in the construction industry are lucky to get 10% in the first place. Your DR Hutton is probably in the speculation game; I'm guessing they're a "developer."

[LeopardPM]

Free Thinkr wrote: ubikk wrote: Free Thinkr wrote: ubikk wrote: Free Thinkr wrote: chris_mthomas wrote: But this isn't indicative of "greed in the housing industry", just of the speculative nature of markets.
Ahhhhh. 8:)

hehe, what drives speculation? Greed!
But it's not in the hoouuusssing industry. It's not in industry at all, in fact.

OK then, the real estate speculation industry.
*ding* *ding* *ding*

Give this man a prize!



oh geez! give it a break! Yes, the big bad 'land speculators - everyone run and hide! Find another scapegoat, please!

[chris_mthomas]

Quote: hehe, what drives speculation? Greed!
The word "greed" has a certain negative connotation that I don't think applies in this situation.

I offer you any item, let's say, a tulip. You buy the tulip off me for $1, and let's assume you are pretty much guaranteed that you can sell it in a day for $10. Buy purchasing the tulip, are you being greedy? Or rational?

Although markets can be very efficient, there are a few circumstances where they can break down. A market that is overrun with speculation is one such instance.

It's important to remember that the goal of a market is to correctly value a given asset, and usually, they're quite effective. In the market for oranges, the farmer and the consumer almost inadvertently send a vast amount of information to each other as to the correct valuation of the fruit through their actions and buying behavior. The farmer that sells his product vastly above what people are willing to buy it goes out of business, and the consumer that is not willing to pay what the farmers demand for their labor is unable to get the pleasure of enjoying the orange. Usually, in a market for a good such as an orange, there is little speculation. But it does happen - just read up on "Tulipomania" in Holland in the 16th century (http://www.stock-market-crash.net/tulip-mania.htm).

For a financial assets, however, the market is a bit less clear. Let's say I offered you a magic little box that spit out $100 every year. How much would you pay for that box? Well, of course, it depends on your own personal preferences and spending patterns. But if there were enough people that wanted to buy my magic box, as well as a number of other people selling these boxes, the market can correctly put a value on my magic little box.

That box that spits out $100 a year is roughly equivalent to a risk-free asset such as U.S. Treasury Bonds (obviously, U.S. Treasury bonds aren't perfectly risk free, because they're affected by inflation... i.e. the box won't be worth as much if inflation skyrockets 10% in a year, because then the real value of the $100 is only about $91). Now let's say you have a different problem - I offer a magic little box that you don't know how much money it will spit out in a year. You can get as much information as you can about the box, and you have a pretty good idea that it'll spit out around $100 dollars a year. But you aren't sure. Depending on whether it's a good box or a bad box, it could give you $200 dollars a year. It could give you nothing. Let's say that you decide to buy it anyway, for $500. Both you and any other prospective buyers are constantly looking for any additional information as to whether the box is good or bad: if the box spits out $200 the first year, suddenly many more people are interested in your box, and the price goes up. You end up deciding to sell the box for $900. You just made $200 from the actual box, and then $400 additional just because everyone else in the market was optimistic about the box.

Excuse the extended continuation of that metaphor. This second, more risky box is analogous to a stock, and is much more subject to speculation. Because the fundamental valuation of a stock is dependent of the likeliness and size of future returns, much of what goes into the price of a stock is how the market feels about the company's future. Because of this, the value can go up or down depending on news and economic conditions. But because in the long run most companies grow, it makes the investor much more concerned with the money they could make selling the stock than the actual income they produce (dividends). In such a circumstance, if everyone is optimistic about the future, and thus the price keeps on rising, how wouldn't it be rational for someone to buy and hold on to an asset simply in the hopes that the price will rise?

And so the market breaks down. The correct valuation is lost. And suddenly everyone wakes up and finds themselves paying $100 a share for a company that has no business plan, or forking over $76,000 for a Tulip.

Real Estate is no different. When interest rates have been so dangerously low, and the bond market so distorted by Chinese and other East Asian over investment, it suddenly becomes incredibly rational to buy a house NOW, when rates were enormously low. And where there's surging demand, there's surging prices. Suddenly, it's not only rational to buy a house because interest rates were so low, but also because you see that the the price of your house is likely to rise. Is any of this greedy? No. It's what any one of us would do as intelligent human beings.

As for the bubble bursting, I personally blame Greenspan. One can say alot about the former Fed chair, but he just didn't do enough to curb speculative bubbles. First the stock market, now this. Even if you love the guy, this is the second time that he really screwed up. And no doubt Bernake and Bush will get the vast majority of the blame.

[beachbum bob]

chris_mthomas wrote:

As for the bubble bursting, I personally blame Greenspan. One can say alot about the former Fed chair, but he just didn't do enough to curb speculative bubbles. First the stock market, now this. Even if you love the guy, this is the second time that he really screwed up. And no doubt Bernake and Bush will get the vast majority of the blame.

easy money policy where everyone was trying to get their cut...the apprasisers, the agents, the loan originators...and absolutely no oversight by the FED or the banking regulators into the "exotic loan" scams, the piggy-back mortgage scams to avoid PMI, and all the rest

and you are right, Bernake and Bush will be blamed...while Greespan is directly responsible for not one, but two asset bubble crashes

[ubikk]

beachbum bob wrote:
and you are right, Bernake and Bush will be blamed...while Greespan is directly responsible for not one, but two asset bubble crashes

Greenspan worked for the President. If a President really wanted him to cut interest rates, or raise them he would have done it.

In fact, even the financial industry pundits often remarked about how Greenspans actions did not seem to match reality or even what he claimed his own reasons were. They constantly questioned why he was raising rates in the 90s when there was no inflation and constantly questioned why he kept lowering them in the 00's despite the fact that there was not a serious, protracted recession and that inflation, particularly in food an energy, was rearing its head.

[beachbum bob]

ubikk wrote: beachbum bob wrote:
and you are right, Bernake and Bush will be blamed...while Greespan is directly responsible for not one, but two asset bubble crashes

Greenspan worked for the President. If a President really wanted him to cut interest rates, or raise them he would have done it.

In fact, even the financial industry pundits often remarked about how Greenspans actions did not seem to match reality or even what he claimed his own reasons were. They constantly questioned why he was raising rates in the 90s when there was no inflation and constantly questioned why he kept lowering them in the 00's despite the fact that there was not a serious, protracted recession and that inflation, particularly in food an energy, was rearing its head.

good questions...especially raising the rates in the runup to the 2000 elections...to around 7% if I remember...