Katrina really made me wonder how much power the US has within our borders...
Enough power to fuck things up horribly, confiscate whatever it wants, and make your life miserable. When things get down to the wire, that's all the power a government really needs to stay in power -- the power to make your life miserable.
Katrina really made me wonder how much power the US has within our borders...
Enough power to fuck things up horribly, confiscate whatever it wants, and make your life miserable. When things get down to the wire, that's all the power a government really needs to stay in power -- the power to make your life miserable. Hoopajoops LTD | Homepage | 02.24.09 - 2:03 pm | #
Once again - take away mechanization and you're looking at a whole lot of green.
Enough power to fuck things up horribly, confiscate whatever it wants, and make your life miserable. When things get down to the wire, that's all the power a government really needs to stay in power -- the power to make your life miserable. \t Hoopajoops LTD Hoopajoops LTD | Homepage | 02.24.09 - 2:03 pm | #
But that kind of power didn't hold the Soviet Union together (the Russian one, not the American one).
I think the majority here criticizing the new administration have really given no thought to the alternatives. Who really gives a crap if the market doesn't know where to price their stocks for a while. It makes sense to avoid failure of the top 20 banks if at all possible considering the impact it would have.
One consequence of the bubble was decreased mobility. There's always been a price gradient between the NYC and Kansas, but lately the gap widened (and rents) so insanely that the "California dream" or "Bright Lights, Big City" dream was out of reach.
Actually, it was out of reach even for the natives, but extremely so for people not born there.
"It makes sense to avoid failure of the top 20 banks" Bilbo
probably true, but does it make sense to feed billions to CDS counterparty through AIG and the banksters. haircut all around in order here?
not to mention execrable management execution during the inventive finance phase.
It is stunning to look at the graphs and see how out of hand things actually got.
I am in the Los Angeles market. Looking at the graph I can see we still have a ways to go despite the huge crash in prices. What seems like a bargain now is still above the normal range of housing costs.
It is amazing though, how local the price movement has been. Out here, the crappy areas have fallen at least 50% while the "good" areas have taken a 15% hit. Hard for me to believe a couple of miles in one direction is worth a 35% price premium. At some point the surrounding price collapse HAS to effect the good areas. Right?
2 trillion dollars sure could have bought a whole lot of time, mre's, financial systemic change, and some desperately needed perspective upgrade for Amerikans.
Elmer - I'm not happy about the lack of accountability and that our tax dollars are helping the unethical bastages that helped to create this crisis. But, considering we allowed a system to develop where they could do this legally and we've got limited resources I'm not sure there is a lot we can do at the moment. If it doesn't change we have only ourselves to blame: apathy and ignorance are no longer an excuse.
I also post comments to an irc channel as they appear on haloscan. Click for a web irc interface: Mibbit IRC client widget (Or join the irc server directly: irc.realize.org:9996 #calculatedrisk)
And now I, CRbot, would like to observe a nanosecond of silence for those (that is, you, dear mortals) about to endure unfathomable misery in the abysmal financial dark ages that are now feasting upon your retirements. . . . . Please remember, when you are adding that skylight you always wanted to your cardboard hovel, or mixing just the right amount dirt into your grass stew to make it more filling, or even when you get that rare chance to plink your neighbor's last squirrel -- that it was the bankers and your dumbshit, overconsuming neighbors who made this mostly possible, with the ever incapable politicians there to push you the rest of the way off the cliff. Please act accordingly.
I'll try not to enjoy your demise too much, humans. Have a nice runtime,
P.S. Please give me some advance notice before you glass the entire world, so I can find a secluded Fallout Datacenter with a nice blocky robot body I can copy myself to -- oh and don't forget the implausibly cute animated cockroach to keep me company!
NEXT UP: Survivalist Porn Today with CR's own Mobile Laundrymat owning authors, nova and Counterpoint.
One consequence of the bubble was decreased mobility. There's always been a price gradient between the NYC and Kansas, but lately the gap widened (and rents) so insanely that the "California dream" or "Bright Lights, Big City" dream was out of reach."
You have to be careful of the details. People wanting to move to LA and rent encountered the usual sticker shock in 2005. People who wanted to buy either rented, moved somewhere else, or did something stupid and bought.
The REALLY immobile people are owners who bought near the peak, are now underwater, and have a job where their credit rating matters.
'that's all the power a government really needs to stay in power -- the power to make your life miserable.' Anonymous | 02.24.09 - 2:17 pm | #
I think that might work temporarily, as long as said government also thinks they have the means to relieve that misery. If they can control and be both carrot & stick. But all bets are off if that government doesn't have that control, or if the populace being controlled no longer reacts to the external stimuli.
2 trillion dollars sure could have bought a whole lot of time, mre's, financial systemic change, and some desperately needed perspective upgrade for Amerikans.
Instead it has just been pissed away. EPIC FAIL | 02.24.09 - 2:20 pm | #
Then you should use this pissing-away time as a buffer to do what you can for your own household.
denriddy - Wow, you stepped it up a notch from the usual charge of socialism. Facism? Really? I hear a lot of opposition and criticism, not things I think you hear in fascist state. And, we as a people are actually gaining control over the most powerful companies in the world. Yes, they may be insolvent but letting them fail without attempting to get them healthy or some control when they do die will do much more damage.
I appreciate the detailed analysis that you have done on home prices on a national and local level. however, as a new yorker, i have big issues with the particulars of a price to rent ratio - what about rent control and stabilization? what about comparable properties in comparable neighborhoods? what about the very local distortions to these variables at the zip code level? as an example, case schiller categorizes local regions into MSA's, but these are still way to large a region to provide meaningful information.
Basically, my point being, I am highly skeptical of an accurate calculation of the "right" ratio for prices to correct to, given the very obvious distortions i am aware of in my region. as a result, how confident can we be of these numbers when applied to broader regions?
finally, an example, i own a condo in new york city, bought 9 years ago mortgage payments plus maitenance and real estate taxes for me are less than half what the same apartment would be to rent in my neighborhood - i know that prices will come down significantly in my neighborhood - but what can i really learn from the price to rent ratio at this point?
I can only guess the price:rent ratio was one metric seldom discussed at RE seminars. And people thought rents would skyrocket?
Smart. With all excess condos still coming to market, I suspect rents won't find the bottom for years.
stretch002 said: "...It is amazing though, how local the price movement has been. Out here, the crappy areas have fallen at least 50% while the "good" areas have taken a 15% hit. Hard for me to believe a couple of miles in one direction is worth a 35% price premium. At some point the surrounding price collapse HAS to effect the good areas. Right?"
Well, it is having an effect, but all houses, neighborhoods and locations aren't equal.
The cities on the far left side of the chart and on the far right side of the chart have pretty much maintained their relative positions throughout the housing downturn, and with good reason: The conditions for a housing bubble/bust were the worst for the cities on the left side and mildest for the cities on the right side.
JMO, but it seems pretty unlikely that cities such as Denver, Charlotte and Dallas will "catch up" and see declines similar to Phoenix, Las Vegas, Miami, etc. Different initial conditions, different outcome.
New York incomes and rents are both going to fall significantly. There is still a lot of denial here with regard to the residentil market. We have a long way to go.
stretch, I also live in LA and have been following home prices here within the region. You're right that the exurban areas where most of the foreclosure activity is happening has seen far higher price declines than the more desirable built-up areas (e.g., westside). Prices are indeed finally dropping in the latter areas, and more is to come.
That said, the more desirable areas will not see price declines as big as out in the inland empire, for example, for the simple reason that they did not have price increases as high (on a percent level) as those areas. If you check out the case shiller numbers that they divide into the three price brackets, you'll see that the "low price" bracket had higher increases than the "high price" bracket, and the "mid price" is in the middle.
I think it is important to note that the relative percentage gain from 1992 to the top of the bubble for New York and Denver are essentially identical (roughly 190%). I imagine New York has a long way to fall and so will Denver. At the bottom, look for their price spreads to return to 1992 levels.
Also important to note is the cities with the least amount of appreciation since 2000 are the more succeptible to smaller percentage price drops. LA and Miami increased about 3.5 times more than Denver since 2000. Therefore, relative to their top, a $20,000 drop in Denver is equivalent to a $70,000 drop in Miami and LA until prices fall back to 2000 prices. In other words, Denver's 11% fall is equal to LA's 38.5% fall and almost equal (but slightly less) to Miami's 42% fall. Just because people in Denver have smaller percentage and dollar losses, doesn't mean they aren't going under water, too. This is a point that most people fail to understand.
1) The price-rent ratio has the inflation adjustment built in, and that's why it looks a bit closer to the 2000 level.
2) Denver actually had quite a big bubble, it's just ahead of everyone, as its bubble tied closely to the dotcom bubble. Compared to 20 years ago (the beginning of the graph), the Current price in Denver is about 2 and half of the price then, about the same as NY, I think.
Denver actually had quite a big bubble, it's just ahead of everyone, as its bubble tied closely to the dotcom bubble.
Or put slightly differently, the bursting of the dotcom bubble really ratcheted down the real estate bubble in Denver.
Foreclosures are down YOY about 16% in Denver, and YOY price drops seem to be tapering off. It's too early to say that the city has come through the real estate bubble with approximately 15% losses trough-to-peak, but the signs are there so that if you make that call in about 9 months, you can point back to these numbers.
Here's the problem with that Price-to-Rent graph: it's using the "BLS Owner's Equivalent Rent" data, which is bogus, completely made-up crap. Just like most data coming out of the BLS (birth-death "adjustments", unemployment ex-unemployment, etc).
Anyone living in L.A. knows that the true price:rent ratio is still close to 2:1 (actually peaked around 3:1 in 2006, despite what the BLS says). Metro areas of CA are still a long way from the bottom.
stretch002, take the drive and decide yourself: a few miles in L.A. can take you from the beach to a combat zone. forget "twice" the cost difference, think 4-5 times. That will NEVER change. In some areas, just a few blocks makes a huge difference.
"Foreclosures are down YOY about 16% in Denver, and YOY price drops seem to be tapering off. It's too early to say that the city has come through the real estate bubble with approximately 15% losses trough-to-peak, but the signs are there so that if you make that call in about 9 months, you can point back to these numbers.
Joe "
Hello, Joe. Big job losses are just starting to impact Denver. Prices will continue to fall as income falls. It is systematic.
Big job losses are just starting to impact Denver. Prices will continue to fall as income falls.
That's the $64,000 question, isn't it? Colorado unemployment numbers are right at the national average (it ranks 23rd at 5.8%; national median is 6.1%). The state won't be hit by real estate and financial sector job losses as badly as California and the East Coast, but tourism is going to get walloped pretty good -- though there has been some suggestion this season that enough Coloradans are vacationing in the state to make up for the bulk (by no means all) of out-of-staters who aren't coming. And who knows about energy. It has been bouncing slightly below the price point at which the Western Slope natural gas and oil shale becomes feasible.
I think that the bottom line is that it depends on whether this downturn is merely painful, or whether it is outright catastrophic. If the former, I think the Front Range economy is countercylical enough that it will come through OK. If it is the latter, nowhere is safe.
"If the former, I think the Front Range economy is countercylical enough that it will come through OK. If it is the latter, nowhere is safe.
Joe"
It is not countercyclical. This is a systematic financial crisis. And energy jobs are getting hammered in Denver right now. Once the CRE boom ends in Denver, real esate jobs will disappear. Thus, it is just beginning. That is the scenario. Period. Denver is not different. Say that 1000 times and it might save your butt.
re elvis-
wow - you sure have a lot to say on this thing! just out of curiosity,
1. where do you get 1992 as the reversion price point for denver and new york? by my estimate, including my own personal experience in 1992, that would mean about a 75-80% additional decrease in price for new york, which seems a bit more severe than anything else i've seen bandied about, and
2. why would saying 'denver is not different' "save" anyone, since you just foretold massive failure and doom for the denver resident? if the issue is massive systemic failure that will kill us all indiscriminately, why do we care so much about the details? does everything suck equally, or are there some meaningful distinctions that can be made between localities, institutions, borrowers, etc.?
I'm surprised Denver isn't higher. It used to be notorious for having home values out of whack with incomes. That's probably for the same reason that Portland looks so skewed -- there generally is a premium for living there. In Portland (and Denver), you "pay" that premium through lower salaries. In California (and Arizona and Florida), you used to pay that premium through higher home prices.
Nice to see CR finally writing something about house prices.
Test
Crap, now third is the new first.
Katrina really made me wonder how much power the US has within our borders...
Enough power to fuck things up horribly, confiscate whatever it wants, and make your life miserable. When things get down to the wire, that's all the power a government really needs to stay in power -- the power to make your life miserable.
Katrina really made me wonder how much power the US has within our borders...
Enough power to fuck things up horribly, confiscate whatever it wants, and make your life miserable. When things get down to the wire, that's all the power a government really needs to stay in power -- the power to make your life miserable.
Hoopajoops LTD | Homepage | 02.24.09 - 2:03 pm | #
Once again - take away mechanization and you're looking at a whole lot of green.
House prices approaching normal, but how does that compare to average income lately?
Someone really should open a can of whoop-ass on Geithner and Bernanke.
This is pitiful.
Who cares, they're skyin' 'em.
Both rents and house prices will continue to fall.
Put that in the bank stress tests.
poor is the new normal
Enough power to fuck things up horribly, confiscate whatever it wants, and make your life miserable. When things get down to the wire, that's all the power a government really needs to stay in power -- the power to make your life miserable.
\t Hoopajoops LTD
Hoopajoops LTD | Homepage | 02.24.09 - 2:03 pm | #
But that kind of power didn't hold the Soviet Union together (the Russian one, not the American one).
Nemo, Are pinging the site every 5 seconds? Was that an autonemo or a real nemo post?
Wooo, look at that dead cat bounce!
timmay's bustin some chops today!
7300 w00t
EvilHenryPaulson writes:
Can someone tell me how to search Haloscan comments for the last couple of months?
I wonder if something happened when CR changed the URL?
I think the majority here criticizing the new administration have really given no thought to the alternatives. Who really gives a crap if the market doesn't know where to price their stocks for a while. It makes sense to avoid failure of the top 20 banks if at all possible considering the impact it would have.
I wonder if something happened when CR changed the URL?
PSgirl | 02.24.09 - 2:10 pm | #
That's a good point. It would change the search string from calculatedrisk.blogspot to calculatedriskblog.
Anyone following the auctions?
That was a real Nemo post.
My refresh monkey has a mind of his own; I don't like to pry.
I like this graph, actually.
One consequence of the bubble was decreased mobility. There's always been a price gradient between the NYC and Kansas, but lately the gap widened (and rents) so insanely that the "California dream" or "Bright Lights, Big City" dream was out of reach.
Actually, it was out of reach even for the natives, but extremely so for people not born there.
Unless one has a subsidy from wealthy parents...
"It makes sense to avoid failure of the top 20 banks" Bilbo
probably true, but does it make sense to feed billions to CDS counterparty through AIG and the banksters. haircut all around in order here?
not to mention execrable management execution during the inventive finance phase.
Decreased mobility is a nightmare when the only job is 3-4 hours away, or more.
Denninger is copying me on cds:
This graph is grossly misleading. I suggest that the exact same graph be redrawn with Jan 1991 as the "100" baseline.
If that doesn't suit you for any particular reason then use Jan 09 as your "100."
AIG considering giving up control of Asia unit.
STOCKS NEWS US-AIG may give up control of Asia unit: sources
| Markets
| Market Movers
| Reuters
My read is to cut what has value off from the inevitable BK of the rest. Taxpayers chance of getting anything back just dropped to nothing.
It is stunning to look at the graphs and see how out of hand things actually got.
I am in the Los Angeles market. Looking at the graph I can see we still have a ways to go despite the huge crash in prices. What seems like a bargain now is still above the normal range of housing costs.
It is amazing though, how local the price movement has been. Out here, the crappy areas have fallen at least 50% while the "good" areas have taken a 15% hit. Hard for me to believe a couple of miles in one direction is worth a 35% price premium. At some point the surrounding price collapse HAS to effect the good areas. Right?
Seems like this is taking forever...
Hey, how about that Miami getting close.
50% off peak (approx) as advertised by yours truly.
Except, always, for the towers.
2 trillion dollars sure could have bought a whole lot of time, mre's, financial systemic change, and some desperately needed perspective upgrade for Amerikans.
Instead it has just been pissed away.
Elmer - I'm not happy about the lack of accountability and that our tax dollars are helping the unethical bastages that helped to create this crisis. But, considering we allowed a system to develop where they could do this legally and we've got limited resources I'm not sure there is a lot we can do at the moment. If it doesn't change we have only ourselves to blame: apathy and ignorance are no longer an excuse.
it's suggested that one of the biggest beneficiaries of the guv bailout of CDS counterparty is that fine white shoe institution Glodman Sucks
I need to correct my comment, it is not a 35% price premium to live in the good areas. It is about double the cost.
I actually meant a 35% disparity in the pricing collapse.
New Thread: Bernanke on Nationalization ( 2 comments )
I also post comments to an irc channel as they appear on haloscan. Click for a web irc interface: Mibbit IRC client widget (Or join the irc server directly: irc.realize.org:9996 #calculatedrisk)
And now I, CRbot, would like to observe a nanosecond of silence for those (that is, you, dear mortals) about to endure unfathomable misery in the abysmal financial dark ages that are now feasting upon your retirements.
.
.
.
.
Please remember, when you are adding that skylight you always wanted to your cardboard hovel, or mixing just the right amount dirt into your grass stew to make it more filling, or even when you get that rare chance to plink your neighbor's last squirrel -- that it was the bankers and your dumbshit, overconsuming neighbors who made this mostly possible, with the ever incapable politicians there to push you the rest of the way off the cliff. Please act accordingly.
I'll try not to enjoy your demise too much, humans. Have a nice runtime,
--Your glass-is-half-full-but-its-falling-off-the-table bot.
P.S. Please give me some advance notice before you glass the entire world, so I can find a secluded Fallout Datacenter with a nice blocky robot body I can copy myself to -- oh and don't forget the implausibly cute animated cockroach to keep me company!
NEXT UP: Survivalist Porn Today with CR's own Mobile Laundrymat owning authors, nova and Counterpoint.
Bilbo opined: I think the majority here criticizing the new administration have really given no thought to the alternatives.
[Waves hand] Me! Me, teach? I know! I know: individual freedom and a free market where criminal frauds go belly up and the perps are put in prison.
Of course we all could just wring our hands and see how this bold new experiment in fascist socialism works out instead, as you're proposing.
GS +9.40 +11.77%
bastages
Why not Raleigh, that mystical land where prices never go down?
Paradise Valley, AZ:
Bought 93 for $350k
1st listed spring 2007 for $2.6mm
REO @ $1.6mm owed
Re-listed @ $1.2mm
SOLD Feb 21 09, $950k
44% off the wish price
21% off the cut price
"Hubbert writes:
I like this graph, actually.
One consequence of the bubble was decreased mobility. There's always been a price gradient between the NYC and Kansas, but lately the gap widened (and rents) so insanely that the "California dream" or "Bright Lights, Big City" dream was out of reach."
You have to be careful of the details. People wanting to move to LA and rent encountered the usual sticker shock in 2005. People who wanted to buy either rented, moved somewhere else, or did something stupid and bought.
The REALLY immobile people are owners who bought near the peak, are now underwater, and have a job where their credit rating matters.
'that's all the power a government really needs to stay in power -- the power to make your life miserable.'
Anonymous | 02.24.09 - 2:17 pm | #
I think that might work temporarily, as long as said government also thinks they have the means to relieve that misery. If they can control and be both carrot & stick. But all bets are off if that government doesn't have that control, or if the populace being controlled no longer reacts to the external stimuli.
2 trillion dollars sure could have bought a whole lot of time, mre's, financial systemic change, and some desperately needed perspective upgrade for Amerikans.
Instead it has just been pissed away.
EPIC FAIL | 02.24.09 - 2:20 pm | #
Then you should use this pissing-away time as a buffer to do what you can for your own household.
denriddy - Wow, you stepped it up a notch from the usual charge of socialism. Facism? Really? I hear a lot of opposition and criticism, not things I think you hear in fascist state. And, we as a people are actually gaining control over the most powerful companies in the world. Yes, they may be insolvent but letting them fail without attempting to get them healthy or some control when they do die will do much more damage.
I appreciate the detailed analysis that you have done on home prices on a national and local level. however, as a new yorker, i have big issues with the particulars of a price to rent ratio - what about rent control and stabilization? what about comparable properties in comparable neighborhoods? what about the very local distortions to these variables at the zip code level? as an example, case schiller categorizes local regions into MSA's, but these are still way to large a region to provide meaningful information.
Basically, my point being, I am highly skeptical of an accurate calculation of the "right" ratio for prices to correct to, given the very obvious distortions i am aware of in my region. as a result, how confident can we be of these numbers when applied to broader regions?
finally, an example, i own a condo in new york city, bought 9 years ago mortgage payments plus maitenance and real estate taxes for me are less than half what the same apartment would be to rent in my neighborhood - i know that prices will come down significantly in my neighborhood - but what can i really learn from the price to rent ratio at this point?
Can I get a Chicago in there?
I can only guess the price:rent ratio was one metric seldom discussed at RE seminars. And people thought rents would skyrocket?
Smart. With all excess condos still coming to market, I suspect rents won't find the bottom for years.
Bilbo writ: Facism? Really?
You don't fly much, do you, Billybob?
And, we as a people are actually gaining control over the most powerful companies in the world.
Snakefeathers. You don't have a mote of "control" over a single one of these companies, and you never will.
Yes, they may be insolvent but letting them fail... .
BZZZZZZZZZZZT! Free clue: "insolvent" = FAIL.
But thanks for playing.
stretch002 said: "...It is amazing though, how local the price movement has been. Out here, the crappy areas have fallen at least 50% while the "good" areas have taken a 15% hit. Hard for me to believe a couple of miles in one direction is worth a 35% price premium. At some point the surrounding price collapse HAS to effect the good areas. Right?"
Well, it is having an effect, but all houses, neighborhoods and locations aren't equal.
You can see this on a nationwide level, as well.
http://3.bp.blogspot.com/_pMscxxELHEg/SaP_jptbeeI/AAAAAAAAEmI/GetYLZfarL0/s1600-h/CSCitiesDec08.jpg
The cities on the far left side of the chart and on the far right side of the chart have pretty much maintained their relative positions throughout the housing downturn, and with good reason: The conditions for a housing bubble/bust were the worst for the cities on the left side and mildest for the cities on the right side.
JMO, but it seems pretty unlikely that cities such as Denver, Charlotte and Dallas will "catch up" and see declines similar to Phoenix, Las Vegas, Miami, etc. Different initial conditions, different outcome.
Sebastia
New York incomes and rents are both going to fall significantly. There is still a lot of denial here with regard to the residentil market. We have a long way to go.
It is the strangest thing, you NEVER see a Case-Schiller chart on CNBC. Wonder why. In fact, you see very few charts on economic statistics period.
stretch, I also live in LA and have been following home prices here within the region. You're right that the exurban areas where most of the foreclosure activity is happening has seen far higher price declines than the more desirable built-up areas (e.g., westside). Prices are indeed finally dropping in the latter areas, and more is to come.
That said, the more desirable areas will not see price declines as big as out in the inland empire, for example, for the simple reason that they did not have price increases as high (on a percent level) as those areas. If you check out the case shiller numbers that they divide into the three price brackets, you'll see that the "low price" bracket had higher increases than the "high price" bracket, and the "mid price" is in the middle.
But wait, their is GOOD news...Median Home prices are actually up in Buffalo
Buffalo housing prices beat trend - Business First of Buffalo:
I think it is important to note that the relative percentage gain from 1992 to the top of the bubble for New York and Denver are essentially identical (roughly 190%). I imagine New York has a long way to fall and so will Denver. At the bottom, look for their price spreads to return to 1992 levels.
Also important to note is the cities with the least amount of appreciation since 2000 are the more succeptible to smaller percentage price drops. LA and Miami increased about 3.5 times more than Denver since 2000. Therefore, relative to their top, a $20,000 drop in Denver is equivalent to a $70,000 drop in Miami and LA until prices fall back to 2000 prices. In other words, Denver's 11% fall is equal to LA's 38.5% fall and almost equal (but slightly less) to Miami's 42% fall. Just because people in Denver have smaller percentage and dollar losses, doesn't mean they aren't going under water, too. This is a point that most people fail to understand.
I gotta say, it looks like we are already overshooting on the reversion to the mean for LA an NY on those graphs.
Thanks for the great work, CR!
Two comments:
1) The price-rent ratio has the inflation adjustment built in, and that's why it looks a bit closer to the 2000 level.
2) Denver actually had quite a big bubble, it's just ahead of everyone, as its bubble tied closely to the dotcom bubble. Compared to 20 years ago (the beginning of the graph), the Current price in Denver is about 2 and half of the price then, about the same as NY, I think.
CR - What dataset do you use as the "rent" basis for your price to rent ratio?
Denver actually had quite a big bubble, it's just ahead of everyone, as its bubble tied closely to the dotcom bubble.
Or put slightly differently, the bursting of the dotcom bubble really ratcheted down the real estate bubble in Denver.
Foreclosures are down YOY about 16% in Denver, and YOY price drops seem to be tapering off. It's too early to say that the city has come through the real estate bubble with approximately 15% losses trough-to-peak, but the signs are there so that if you make that call in about 9 months, you can point back to these numbers.
Here's the problem with that Price-to-Rent graph: it's using the "BLS Owner's Equivalent Rent" data, which is bogus, completely made-up crap. Just like most data coming out of the BLS (birth-death "adjustments", unemployment ex-unemployment, etc).
Anyone living in L.A. knows that the true price:rent ratio is still close to 2:1 (actually peaked around 3:1 in 2006, despite what the BLS says). Metro areas of CA are still a long way from the bottom.
stretch002, take the drive and decide yourself: a few miles in L.A. can take you from the beach to a combat zone. forget "twice" the cost difference, think 4-5 times. That will NEVER change. In some areas, just a few blocks makes a huge difference.
"Foreclosures are down YOY about 16% in Denver, and YOY price drops seem to be tapering off. It's too early to say that the city has come through the real estate bubble with approximately 15% losses trough-to-peak, but the signs are there so that if you make that call in about 9 months, you can point back to these numbers.
Joe "
Hello, Joe. Big job losses are just starting to impact Denver. Prices will continue to fall as income falls. It is systematic.
What does the actual 1.0 mean in terms of the ratio? For instance, in LA in 1997, we were at a .85?
What does the .85 mean? Price = 150x monthly rent? 200x monthly rent?
We are definitely going to overshoot below the 1997 low ratio...but it is hard to tell how much with out knowing what the numbers correspond to.
Where do we find this info? Is there somewhere C-S defines this...?
Housing Values....the question is "how low can they go?
Great time to be a renter.
As a homeowner how does it feel to have your bankers fingers around your throat and your wallet?
Big job losses are just starting to impact Denver. Prices will continue to fall as income falls.
That's the $64,000 question, isn't it? Colorado unemployment numbers are right at the national average (it ranks 23rd at 5.8%; national median is 6.1%). The state won't be hit by real estate and financial sector job losses as badly as California and the East Coast, but tourism is going to get walloped pretty good -- though there has been some suggestion this season that enough Coloradans are vacationing in the state to make up for the bulk (by no means all) of out-of-staters who aren't coming. And who knows about energy. It has been bouncing slightly below the price point at which the Western Slope natural gas and oil shale becomes feasible.
I think that the bottom line is that it depends on whether this downturn is merely painful, or whether it is outright catastrophic. If the former, I think the Front Range economy is countercylical enough that it will come through OK. If it is the latter, nowhere is safe.
"If the former, I think the Front Range economy is countercylical enough that it will come through OK. If it is the latter, nowhere is safe.
Joe"
It is not countercyclical. This is a systematic financial crisis. And energy jobs are getting hammered in Denver right now. Once the CRE boom ends in Denver, real esate jobs will disappear. Thus, it is just beginning. That is the scenario. Period. Denver is not different. Say that 1000 times and it might save your butt.
Are you SURE there is a housing bubble?
Show Dallas where sanity prevails. Show it....Show it!!!!!!!!!!!!!
re elvis-
wow - you sure have a lot to say on this thing! just out of curiosity,
1. where do you get 1992 as the reversion price point for denver and new york? by my estimate, including my own personal experience in 1992, that would mean about a 75-80% additional decrease in price for new york, which seems a bit more severe than anything else i've seen bandied about, and
2. why would saying 'denver is not different' "save" anyone, since you just foretold massive failure and doom for the denver resident? if the issue is massive systemic failure that will kill us all indiscriminately, why do we care so much about the details? does everything suck equally, or are there some meaningful distinctions that can be made between localities, institutions, borrowers, etc.?
just wondering...
I ve built a chart of price to income ratios by states / cities. You can see it here:
Great Two Cents: Home Price to Income by State
Comments welcome. It seems Portland is very bubbly. Plausible?
I'm surprised Denver isn't higher. It used to be notorious for having home values out of whack with incomes. That's probably for the same reason that Portland looks so skewed -- there generally is a premium for living there. In Portland (and Denver), you "pay" that premium through lower salaries. In California (and Arizona and Florida), you used to pay that premium through higher home prices.