I found it odd that the recent Anderson reports lacked a cohesive opinion especially last week's Bay area report. Better now that Thornberg is off the leash.
the boys a pimco seem to agree with mr. thornberg. it appears that the only choices for the economy are recession or stagflation. if the rest of the world follows us into recession, the dollar probably won't tank. stagflation, on the other hand, could bring rising interest rates and a sinking dollar.
"massive price appreciation that is just not justifiable by any kind of standards of reasonable economics,"
This is the crux of the matter. We've seen for a couple years that there is no economic justification for housing prices. Unless they want to rewrite the Econ 101 textbooks, a hard landing is unavoidable.
It's good that Thornberg is no longer with the Banking Industry backed thinktank and can express himself freely.
K-Dawg, yes, this explains the schizophrenic nature of the most recent East Bay report. Thornberg's sections were negative and the other author more neutral.
edhopper, I just hope he is still quoted in the media!
I'm pretty much in the "there's a bubble" camp, but isn't there indeed a good economic "justification" for the bubble, in the form of very low interest rates?
Anecdotal evidence from my block club meeting in Detroit last week -- Current asking prices for homes are laughable. Prices will have to come way down...
There are only three rational economic justifications for high housing prices
1. Rents are going to increase rapidly in the future.
2. Home buyers have become much more risk tolerant.
3. The Federal reserve is going to let inflation get out of hand.
No other financial market (stock, bond, venture capital) other than the housing market expects any of the above to happen.
Speculative market dynamics is a positive feedback mechanism - up or down. Otherwise known as vicious or virtuous cycles. The best example (other than the '99 tulip-bulb runup in the Nasdaq) is perhaps the Asian currency collapses in '97/'98. By the way as a very interesting and informative exercise take your favoriate stock charting program and tell it to compare the Nasdaq, SPX and Dow from '95-'05.
Anyway (and the nicest discussion is one of Krugman's late 90s books) when currency values inflated because of monetary policies mis-aligned with economic realities (which were mis-reported and disguised) there was feedback that caused them to feed on their own momentum. The problem is that when everybody sees the edge coming all of a sudden there's a rush to be first - like a sandpile collapsing with just one too many grains.
Where that's important is that if housing is a bubble the same dynamics are likely to be there - though perhaps a viscous cycle given the stickiness of housing prices.
Or is it the slowness with which real estate transaction prices are reported?
Who controls this reporting and how it is presented?
I am sure is spun in the most favorable manner.
House prices are got way out of wack from the fundamentals. Anyone that is buying and thinks they will make money in the next 5 years needs to be put on some drugs.
Thornberg ending quote in todays LA Times article says it all.
"Look at what your was valued at three years ago and what it is now. Is it really worth 70% more? The answer is no. There is no way you can justify the math"
If Thornberg goes into consulting, he better learn how to sell - or hire good salesmen.
Consulting is a tough sell - worse than most 'intangible' sales. Basically selling 'maybe what if' & justifying the price of shadows... he'll need to find his own little Willie Loman deep inside.
A fair amount of the increase in housing prices has been due to lower interest rates. Interest rates have topped out now. I don't think we will see rates above 8%, possibly even 7.5% again in my lifetime. A hard landing would likely lower them again but couldn't make up for job losses.
Young Chris will have fun finding clients willing to pay him to tell them how fecked their local economies are because the housing market isn't behaving as his model says it should.
He became the office barking nutter to his Anderson colleagues, and his years-long doom screeching will make his power-point sales pitches a bit hinky.
FYI of the day: Effective with Mortgagee Letter 2002-13, HUD increased the DIL of foreclosure consideration to not to exceed $2,000. Therefore, with the mortgagor's consent, this consideration may be utilized to pay off junior liens to clear the title as stated in Mortgagee Letter 2000-05."
Mr. Bernanke's comments yesterday suggested that after months of being out of step with the nation's markets, the Fed is drawing closer to their view that much lower rates are needed to keep the economy from stalling, despite the risk that rate cuts could fuel inflation.
Go Ben go, we need inflation on top of repaying for taxcuts, go Ben, destroy America!
terest rate futures have already fully priced in a half-percentage point cut from the Fed at its regular policy meeting on Jan. 29-30, with some seeing an even broader 75 basis point cut.
I found it odd that the recent Anderson reports lacked a cohesive opinion especially last week's Bay area report. Better now that Thornberg is off the leash.
the boys a pimco seem to agree with mr. thornberg. it appears that the only choices for the economy are recession or stagflation. if the rest of the world follows us into recession, the dollar probably won't tank. stagflation, on the other hand, could bring rising interest rates and a sinking dollar.
"massive price appreciation that is just not justifiable by any kind of standards of reasonable economics,"
This is the crux of the matter. We've seen for a couple years that there is no economic justification for housing prices. Unless they want to rewrite the Econ 101 textbooks, a hard landing is unavoidable.
It's good that Thornberg is no longer with the Banking Industry backed thinktank and can express himself freely.
K-Dawg, yes, this explains the schizophrenic nature of the most recent East Bay report. Thornberg's sections were negative and the other author more neutral.
edhopper, I just hope he is still quoted in the media!
Best to all.
I'm pretty much in the "there's a bubble" camp, but isn't there indeed a good economic "justification" for the bubble, in the form of very low interest rates?
Anecdotal evidence from my block club meeting in Detroit last week -- Current asking prices for homes are laughable. Prices will have to come way down...
There are only three rational economic justifications for high housing prices
1. Rents are going to increase rapidly in the future.
2. Home buyers have become much more risk tolerant.
3. The Federal reserve is going to let inflation get out of hand.
No other financial market (stock, bond, venture capital) other than the housing market expects any of the above to happen.
Gavi
What took him so long?
Speculative market dynamics is a positive feedback mechanism - up or down. Otherwise known as vicious or virtuous cycles. The best example (other than the '99 tulip-bulb runup in the Nasdaq) is perhaps the Asian currency collapses in '97/'98. By the way as a very interesting and informative exercise take your favoriate stock charting program and tell it to compare the Nasdaq, SPX and Dow from '95-'05.
Anyway (and the nicest discussion is one of Krugman's late 90s books) when currency values inflated because of monetary policies mis-aligned with economic realities (which were mis-reported and disguised) there was feedback that caused them to feed on their own momentum. The problem is that when everybody sees the edge coming all of a sudden there's a rush to be first - like a sandpile collapsing with just one too many grains.
Where that's important is that if housing is a bubble the same dynamics are likely to be there - though perhaps a viscous cycle given the stickiness of housing prices.
How sticky are prices?
Or is it the slowness with which real estate transaction prices are reported?
Who controls this reporting and how it is presented?
I am sure is spun in the most favorable manner.
House prices are got way out of wack from the fundamentals. Anyone that is buying and thinks they will make money in the next 5 years needs to be put on some drugs.
Thornberg ending quote in todays LA Times article says it all.
"Look at what your was valued at three years ago and what it is now. Is it really worth 70% more? The answer is no. There is no way you can justify the math"
If Thornberg goes into consulting, he better learn how to sell - or hire good salesmen.
Consulting is a tough sell - worse than most 'intangible' sales. Basically selling 'maybe what if' & justifying the price of shadows... he'll need to find his own little Willie Loman deep inside.
A fair amount of the increase in housing prices has been due to lower interest rates. Interest rates have topped out now. I don't think we will see rates above 8%, possibly even 7.5% again in my lifetime. A hard landing would likely lower them again but couldn't make up for job losses.
It is more than just the interest rates.
Every bubble has wild credit expansion and very loose lax lending standards before the collapse.
Easy money is drying up now. A fool and their money are late to recognize it.
Young Chris will have fun finding clients willing to pay him to tell them how fecked their local economies are because the housing market isn't behaving as his model says it should.
He became the office barking nutter to his Anderson colleagues, and his years-long doom screeching will make his power-point sales pitches a bit hinky.
FYI of the day: Effective with Mortgagee Letter 2002-13, HUD increased the DIL of foreclosure consideration to not to exceed $2,000. Therefore, with the mortgagor's consent, this consideration may be utilized to pay off junior liens to clear the title as stated in Mortgagee Letter 2000-05."
Mr. Bernanke's comments yesterday suggested that after months of being out of step with the nation's markets, the Fed is drawing closer to their view that much lower rates are needed to keep the economy from stalling, despite the risk that rate cuts could fuel inflation.
Go Ben go, we need inflation on top of repaying for taxcuts, go Ben, destroy America!
terest rate futures have already fully priced in a half-percentage point cut from the Fed at its regular policy meeting on Jan. 29-30, with some seeing an even broader 75 basis point cut.