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 StrangerInTheHouse
Joined: 2/9/2008
Msg: 101
The California RE marketPage 5 of 18    (1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18)


Having a degree in Economics, I say let the market correct itself. No bailouts!

Hmmmm....

Interesting you should say that; and I wonder when you believe a market situation arises where we indeed should do something?

Is that what we should do all the time?

I've been wanting to ask this of someone with an economics degree....



 Janet4ever
Joined: 4/14/2008
Msg: 102
The California RE market
Posted: 4/17/2008 6:47:17 PM
Unfortunately, I think we should have "done something" when the market was raising wildly out of control... now the tables have turned and those greedy enough to buy in to the "never go down" theory are crying foul.

I'm sorry for their misfortune, but it is a necessary part of economics.

We're going down now hard. When it lands, some will suffer, some will prosper, but there will always be those that whine.
 StrangerInTheHouse
Joined: 2/9/2008
Msg: 103
The California RE market
Posted: 4/18/2008 11:31:37 AM
The danger in not bailing them out is that the whole economy will take a nose dive.

This danger exists because so many other industries are attached to the housing market, such as construction companies, real estate businesses, heating and air conditioning manufacturers, lumber and steel mills, as well as other building industries, that changes in the housing market ALWAYS have a mulitplier effect on the whole economy that works positively (creating revenues) or negatively (making revenues decrease exponentially). That can cause a great depression.

For instance, in the late seventies (which you say you didn't have a problem with), the Japanese, flush with income from their booming automotive and electronics markets yet not having enough cash to invest in impossibly expensive Japanese real estate, went into the California real estate market and caused an inflation rate that made the whole economy grow at a 19% rate, causing the price of everything else to go up.

The opposite happened during the great depression.

It happened again in the Japanese recession of the 1990s.

Huge fluctuations in the prices of real estate can build or destroy a whole economy.

You write as if that risk didn't even exist. Hear no evil, see no evil, speak no government bailout... *LOL*

But I do see that risk. Forgive my bluntness, but concerning questions regarding sensible government regulations and whether they should be applied, there are usually two kinds of people: those who think nothing bad will happen to them no matter what happens to anyone else, and those who realize we're all interdependant.

Your writing seems to indicate that you think you could make it without the rest of us?

Imagine you doing what you're doing now in another country... where they didn't have things like defense, public sanitation, public police and fire, public education, etc,etc...

Could you make it?

You seem to believe you could...

That's why I'm in favor of bailouts.

 Janet4ever
Joined: 4/14/2008
Msg: 104
The California RE market
Posted: 4/18/2008 4:27:04 PM
Let the financial institutions handle their own refinancing offers as bailouts. Government should stay out.
 The Minister of Dudeness
Joined: 6/11/2006
Msg: 105
The California RE market
Posted: 4/18/2008 5:25:28 PM
Stranger

Residential real estate is only about 5% of our GDP. There will be no great depression caused by the housing situation. We went through this type of decline in 1972-75 and again in the early 1990's. In 1980-82, interest rates were 14-17% instead of 5 or 7%.

Relax with the sky-is-falling scenario.
 AceOfSpace
Joined: 5/28/2007
Msg: 106
The California RE market
Posted: 4/18/2008 5:49:46 PM
I'm with Janet on this. All of those lenders have the opportunity to renegotiate those loans so that they can at least keep some cash flowing in. If they choose to foreclose because they're too stupid to cut the best deals they can given the realities of what the borrowers whose loans they either made or bought can actually pay, it's not my problem.

I'm sorry, but I'm also in favor of a shakeout in all those construction industries who are so entrenched in outmoded and energy wasteful structures and traffic patterns that we may never be able to retrofit them all.

The real economic shakeout is coming, and every day we ignore the pinch point brings the crunch point a day closer. It could take us 30 years to retool our economy to be sustainable, but nobody's going to have incentive to do it if the taxpayers bail them out. Not the buyers of house-of-cards energy sinks, not the builders, not the sellers, and not the lenders.

We all need to wake up and recognize that food prices will continue to rise with fuel prices until we can decouple food distribution from long-distance transportation. Meanwhile, every dollar invested now in energy savings will reap an increasing return in the future. What other investment can you say that about?

So if you're lucky enough to own a home, GET IT INSULATED, GET THE PV PANELS INSTALLED, GET THE HOT-WATER PANELS UP, and get a local organic farmer to manage your yard. Then, 5 years from now, come back and thank me because you'll still be in your house, the insulation and panels will have paid for themselves, you'll be much healthier because of all that fresh produce you'll get to eat (with the farmer taking the excess away so there's no mess for you to deal with),
you'll have time to spend at the beach instead of mowing your stupid, useless, water-guzzling lawn, and your neighbors will all be after you to help them do it too.

Do you have an electric hot tub? Put up a canopy of solar panels over it and you can generate enough energy to heat it and run the pumps most of the year.

Oh, think I'm just some environmentalist nut job? I beg to differ! I'm just about finished with my 2nd Master degree, this one in Business Administration.
 Janet4ever
Joined: 4/14/2008
Msg: 107
The California RE market
Posted: 4/18/2008 5:59:50 PM
I don't get the crunch point/pinch point thing, but if that organic gardener will pick up my puppy's poop, sign me up!
 The Minister of Dudeness
Joined: 6/11/2006
Msg: 108
The California RE market
Posted: 4/18/2008 6:00:59 PM
Yah, and that gardener has an M.B.A.
 StrangerInTheHouse
Joined: 2/9/2008
Msg: 109
The California RE market
Posted: 4/18/2008 6:21:18 PM
It's a good discussion at this point. I did read some interesting contributions above. However, I'll stand pat on my opinion to agree with the bailout. Even if it's just buying time, a soft landing is better than a hard one and less prone to panic attacks.

The whole economy is based on confidence. We never know the price in dollars and cents until after the market's gone kablooey, but the only way to find out exactly how much it's worth is when it does exactly that.

TOOOOooo big a risk to take when we can afford not to.
 MermaidSari
Joined: 2/4/2007
Msg: 110
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The California RE market
Posted: 9/1/2008 11:36:02 AM
So here we are nearly past what some have predicted to be the bottom (summer 08)...anymore thoughts?

What I find particularly interesting is that some areas in San Diego county have taken larger hits than others (for example La Mesa).

How many thinks this is the bottom still?
 MermaidSari
Joined: 2/4/2007
Msg: 111
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The California RE market
Posted: 9/1/2008 11:44:17 AM
Also Ace
but nobody's going to have incentive to do it if the taxpayers bail them out


I couldn't agree more with this [and can I suggest to hug a tree? <--joking].

The govs. recent bail out to Fannie and Freddy fortunately isn't an over bail out [as was being discussed amongst the liberal powers that be] when considering that the home owners themselves will have to qualify for the re-invented loans...

Any thoughts on the Fannie/Freddy bail out bill passed?
 PolarBearKing
Joined: 4/16/2007
Msg: 112
The California RE market
Posted: 10/14/2008 12:31:39 PM
Prices will continue to fall, with a long flat spell to follow. I guess another 18 months until the bottom, followed by a decade without much appreciation. One should only buy a home to live in (and enjoy modest tax benifits), but not as an investment. JMHO.

Unfortunately, I think that inflation is the only thing that will turn the RE market around. Real Estate will remain stagnant until everything else catches up (both the price of a loaf of bread as well as income). Too bad unemployment is expected to go over 8% by the end of the year.

The bailout has only prolonged the inevitable. Bush's $250B into the banks will stave off complete financial meltdown for a couple more years (if that long). Obama's plan to allow people to withdraw 401k funds without penalty isn't going to help the markets either.

I believe we must take our lumps now and get it over with. Recession/depression has to happen for the balance to return to normal. We've lived off of credit for too long. If we continue to put it off, our (grand)children will certainly pay for our sins.

Scary times ahead for sure...
 BadForumGuy
Joined: 2/16/2008
Msg: 113
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The California RE market
Posted: 10/25/2008 1:59:55 AM
"Residential real estate is only about 5% of our GDP. There will be no great depression caused by the housing situation. We went through this type of decline in 1972-75 and again in the early 1990's. In 1980-82, interest rates were 14-17% instead of 5 or 7%.

Relax with the sky-is-falling scenario."


HAHA wrong.

But then, who would have thought that idiots making loans to other idiots for over priced real estate could wreck the global economy?

It is only going to get worse.
 The Minister of Dudeness
Joined: 6/11/2006
Msg: 114
The California RE market
Posted: 10/25/2008 9:24:22 AM
During the Great Depression, the jobless rate was around 25%. It's at 6 1/2 to 7% now.

In the early 80's, interest rates were 16%; a qualified home buyer can get a 6.2% 30 year fixed mortgage right now.

So, NOT wrong.

Yet, anyway...

The U.S. Treasury has added a new twist to things: The Treasury has printed so much money out of thin air in the last 90 days to replenish the banking system, that the amount of cash in circulation has doubled relatively overnight! Don't be surprised if after the current, early-phase panic subsides and things settle down and we get back to business in a few months, wait a year or 3 after that for the cash flood to cause an inflation tsunami, since there is too much "play money" in the system that over-represents the actual value of goods and services. Therefore, there will be an eventual realization that dollars are not worth what they should be worth, and producers will ask for a higher price, and the government will be out of tricks to try to stop it.
 o4
Joined: 4/7/2007
Msg: 115
The California RE market
Posted: 10/25/2008 10:16:04 AM
M1 doubles in a short time. Either it'll be post-WW1 Germany, or possibly a "trickle sideways" economy sorta circa 1988 again?
 AceOfSpace
Joined: 5/28/2007
Msg: 116
The California RE market
Posted: 10/25/2008 12:04:07 PM
Well, the time for regulation is _before_ the bubble bursts. Of course, no one wants to do it then while they can still milk a little extra from the distorted markets.

What's hurting us isn't so much the overvalued mortgages as all of the derivatives and default credit offsets that were written. Those liabilities far exceed the value of the underlying losses, and it is those liabilities that the banks are still gun-shy about.

No one wants to lend to someone who's going to turn around and use the money to pay off another unsecured liability.

But we need a good shakeout anyway, if nothing else to clear our heads from the American Dream/Delusion that we can go on living like there is no tomorrow.

Meanwhile, more foreclosures and more uncertainty will keep prices down for a while longer. Not a bad time to be shopping carefully if you've got access to cash. Me? I'd be looking for places with plenty of land and ready access to water.
 MermaidSari
Joined: 2/4/2007
Msg: 117
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The California RE market
Posted: 10/26/2008 8:13:13 PM
PolarKing -- What do you think about rentals (a return in rising rents while waiting 7 years)? A lot of investors out there still doing this.

The problem is short sales [difficult to close a deal on these puppies] and block auctions disallow seeing a lot of foreclosures on most of these properties as we do with SF homes.

Ace -- Are lenders being wiser or are they just scared? Look at Wells Fargo who stayed in the green through the whole bank crisis. They never gave out loans very easily. *wink*

Land = longer term investment than before, imo due to what we see now [a lot of folks developing are seen getting out with as less loss as they can now]. Better prices now though for a long hold and definately always wise [they aren't making anymore land are they]. :-p
 onthewestside
Joined: 4/18/2007
Msg: 118
The California RE market
Posted: 2/4/2009 8:03:24 PM
So Ms Sariangel...Long time no 'message'.....I hope you didn't add properties to your portfolio when you first started this forum! And now, rents are falling with house prices...there's more to come...!!!
 matchlight
Joined: 1/31/2009
Msg: 119
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The California RE market
Posted: 2/5/2009 10:15:00 AM
I haven't read all the posts on this thread, so I don't know if anyone's mentioned the effect of environmental regulations on the cost of housing in this state. I know something about this, and I can tell you they increase it quite a lot, both by restricting the supply of raw land and by increasing the time needed to get things built. Delay costs because developers often are operating with borrowed money and have to keep paying interest.

Also, the effect spreads outward from wherever the regulations are imposed. Petaluma's a good example--the "open spaces," utility connection fees, permits, exactions for schools, parks, roads, bikeways, etc. it requires have not only made housing more expensive there, but also in towns nearby. Housing prices increase most in towns prospective buyers view as the best alternatives to Petaluma. And the "spillover effect" is smallest (i.e. the alternative is least desirable) where longer commutes, lower school quality, fewer amenities and public services, higher crime rates, etc. would cost prospective buyers most.

The Endangered Species Acts (both federal and state) have been very ineffective. Like CERCLA (the "Superfund" law for cleaning up the most polluted sites) the FESA has been a disappointment. Billions have been spent to enforce these laws during the decades they've been in effect, with only very modest results. Yet the FESA and CESA often come up in housing development --and when they do, complying with them imposes a cost. When the local housing market is slack, developers may have to absorb this cost, decreasing their profits. But when demand is high relative to the local housing supply, they're able to pass it on to buyers as higher housing prices.

I could go on and on about all the other environmental effects on housing prices-- but that's plenty for here. Hope it's food for thought.
 AceOfSpace
Joined: 5/28/2007
Msg: 120
The California RE market
Posted: 2/8/2009 9:27:25 AM
Yes, M, the costs of environmental regulation are high. No doubt about it. However, what about the costs that result from the lack of environmental regulation?

Pollution and environmental degradation are forms of fraud, forcing unwitting property owners "downstream" to absorb the costs for which a business operation would otherwise be recognized as accountable.

We don't know what the costs of extinction are, or will be to our grandchildren. How do you suggest that they be allocated?

What redress should those downstream property owners be entitled to? And in cases where the damage is irreversible, would it not be a failure of governance to impose the same degree of regulation as we do to prevent monetary frauds that would otherwise cause irreparable harm to investors?
 matchlight
Joined: 1/31/2009
Msg: 121
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The California RE market
Posted: 2/8/2009 11:27:01 AM
Ace, I'm sure some regulation is necessary, but I'd rather see the states do it. During the last 40 years, we've built up a fantastically expensive and burdensome system of federal laws. Economic studies have shown that almost none of them has achieved benefits anywhere near its costs. But even the most intrusive environmental laws have become sacred cows. No matter how much damage, or how little good any of them does, you might as well be against motherhood as oppose it. As a conservative, I think the erosion of property rights--which in the end are personal rights--these laws cause is another strike against them.

Without some definite way to define what a "species" is, I'm not sure what "extinction" means. If the northern spotted owl weren't a separate species, there'd have been no basis for closing tens of thousands of acres of forest to logging. There's an almost identical owl which ranges farther south, and it's in no trouble at all. Whether the two are varieties or sub-species of the same species depends on who's making the call.

In the '90's, the University of Arizona planned to build some scientific instruments on top of Mt. Graham. Just then, a new "species" appeared on the peak--the Mt. Graham red squirrel. The ordinary red squirrel is as common as dirt in the area, but the "discovery" of the new "species" blocked the project. Of course its range was determined by analyzing satellite photos of vegetation--hardly a science--but the vegetation red squirrels are known to prefer was found (amazingly!) to cover the area where the project was planned.

A property owner has always been able to sue another owner for private nuisance, and get injunctive relief if he can prove that owner injured him. And states can sue each other, e.g. for damage to a river they share. They can also form compacts to manage a shared resource, e.g. Lake Tahoe. I've never dreamed of living in Mussolini's Italy, or any other totalitarian state, and I don't want to live in one here--however much a social engineering scheme is ballyhooed as helping children, single mothers, the poor, minorities, or the three-eyed skink.
 Rabbitman49
Joined: 10/20/2005
Msg: 122
The California RE market
Posted: 2/8/2009 5:13:46 PM
I don't believe that we've hit bottom yet. We have one more cycle to go through before we do.

Unemployment in California is in the 9+% range - 2 points above the national average. This means we have more people losing the ability to pay and thus more forclosures than any other region of the U.S. Combine that with California's cuts to services (which if done correctly, should exclude the $10.1B paid to "illegal aliens" per each recent past year for things like food stamps), the decline should yield a net emigration, thus causing the housing supply (both for sale and for rent) to decline even further in value. The state tax increases haven't taken effect yet. When all of these things kick in, we will have one more devaluation.

On July 1, 2009, the sales tax for Los Angeles County will be 10.25%. I don't know what the new top State personal income tax bracket will be, but currently, it's 10.3%* and due to be increased also. However, this time, 10%+ rates will kick in somewhere between $50-100k.

* - Income tax table maximum of 9.3% plus the 1% tax on line 32 of CA form 540.
 matchlight
Joined: 1/31/2009
Msg: 123
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The California RE market
Posted: 2/8/2009 7:25:55 PM

So an upstream state with lax regulations can send its polution to the states downstream? I see no reason to allow that.[/copy]

A state's pollution doesn't often affect other states all that much. For example, the air pollution in L.A. doesn't have any significant effect on Nevada or Arizona, which are 300 miles away from it. I don't think Ace meant "downstream" literally--he seemed to be talking about neighbors who are affected by pollutants from a point source like a factory.

One interesting thing about the major federal environmental laws is that they don't directly prohibit states from polluting. After Congress had passed these laws, it found out EPA didn't have the resources to enforce them throughout the U.S. So most of these laws now operate through a "viceroy" system, in which each state submits its own plan for controlling various kinds of pollution to EPA. Once EPA approves these plans, the state EPA's (or whatever other states call theirs) actually do most of the enforcement of both the federal and state environmental laws.

If one state is harming another, the injured state can sue the other state in the Supreme Court. It's happened a few times.
 AceOfSpace
Joined: 5/28/2007
Msg: 124
The California RE market
Posted: 2/9/2009 2:23:47 PM
No, I was using "downstream" allegorically. By it I meant anyone whose legitimate interest is affected. The sulfure dioxide generated by power plants on the East Coast, which migrates the the Midwest to fall as acid rain, is a cost of operating those power plants. The owners of those plants are accountable for the clean-up costs.

Downstream, downwind, downhill, whatever. The principle of injunctive relief means that individuals need not have to wait until irreparable harm is already done to restrain the activity of those who would do such harm. And if individuals can do that, I see no reason why they cannot delegate their authority to a government.

When it comes to pollution and environmental degradation, the contest is between the power of large corporations and that of governments. To ensure that the rights of individual consumers and property owners are protected against the power of multinational corporations, the scale of government jurisdiction must match or exceed the scale of corporate operations. Otherwise, corporations whose managements have no scruples will just find an easier mark.

You seem to be saying that you would prefer your interests to be trampled by a corporate interests who are not accountable to you over regulation of business activities by a government whom you can vote on.

People come to California for many reasons, but if the reputation of the state is that it is another Love Canal, what will that do to property values?

Sure, there are extremes. But when we talk about the ills of environmental regulation, we should also bear in mind the ills that predated those regulations. How green was that valley?
 matchlight
Joined: 1/31/2009
Msg: 125
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The California RE market
Posted: 2/9/2009 8:04:41 PM

People come to California for many reasons, but if the reputation of the state is that it is another Love Canal, what will that do to property values?


If California alone were responsible for its environmental quality the loss (if any) would be very far down the list of things that made this state unattractive. This state's 3+million illegal immigrants, with the tens of billions they cost each year, incompetent government, atrocious public schools, uncontrolled gang crime, and absurdly burdensome business regulations are among the ills that do far more damage to its reputation.



And if individuals can do that, I see no reason why they cannot delegate their authority to a government.


They could have--but they haven't. My copy of the Constitution doesn't say anything about Congress' authority to compel states to keep their land, air, and waters clean. Courts have sometimes relied on the Commerce Clause as authority, but that can be a stretch, to say the least. (Is a puddle in a parking lot in Delaware really a "water of the United States," and therefore subject to the Clean Water Act under the Commerce Clause, because a few mudhens which might fly into Maryland have started to gather around it???? Give me a break.)

Justice O'Connor explained in the New York case how the 10th Am. limits the authority of the U.S. to dictate what a state must do. That's why EPA relies on economic coercion--enforce federal environmental laws, or lose federal funding for projects related to them. So, for example, a state which doesn't conform its air quality to EPA standards risks its share of federal highway money.

You paint an awfully dim picture of capitalism! But corporations have no reason to exist except to make profits. The big ones are owned by tens of thousands of shareholders, many of them just ordinary people.

Oh--Ace--"How Green was my Valley" was about Wales, not the U.S.
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