There is no housing bubble!

Traffic seems kind of slow, commenters are quiet, and Sunsetbeachguy says it's my fault -- I failed to post a link to the insightful and humorous blog There is No Housing Bubble.   So there is the link, and here are a few highlights:
--"Debt is Wealth!"
--"All it takes today to be rich is to be able to sign the loan papers."
--"Look for a property nobody wants. Find one where everyone says only an idiot would buy that house. Become that idiot and buy that house."

Even if you fail to see the humor in this, you have to give the writer some credit: these posts date from early 2006.

Comments?  Questions? Email story tips to lalandblog@yahoo.com.

Comments

[Bo Frank]

Let's say you do something wise, you purchase a home in California for $500,000. This beautiful and desirable home will appreciate by about 20% per year. Therefore after 30 years that home that the renter unwisely turned his nose up to will be worth a little over $100 million.

[anon]

Actually, US homes are cheaper now, in 2007, than they were in 2001...if priced in euros.

For the majority of the country, they are significantly cheaper.
For SoCal and bubbly areas, they are about the same price now as in 2001...priced in euros.

So, yes, in one sense, there is no housing bubble.
We have just had 6 years of dollar deflation that was ignored--except in frivolous things such as oil, healthcare, college education, precious metals and housing.

[Tex]

Um, that blog is a joke, right?

[Pete]

So what's a $100 million worth in 30 years, then?

Still, I don't think half a million is too much in LA. If you're earning 100k, it's worth a crack... (if not and you never will, get out of LA). There's a reason why it's more expensive than cities in the interior. You should check out housing affordability in Australia; it's just as bad as LA, in smaller cities with lower average wages for professionals, and far higher interest rates. Or New Zealand, where salaries are very low indeed and the cities are more like towns.

[John T Watts]

It looks like renters are having to take a lot of flak for a choice they have every right to make. There is an upside to renting. Your weekends might be free from having to spend time working on some pain in the butt home improvement or plumbing project that brings out the use of every bit of profanity one has ever learned in high school or the military. Of course I'm just talking about me. Some people enjoy that stuff. Instead a person could spend their time doing fun things on the weekends. I've always owned property and have built lots of equity because of it. But it's not the only choice.

[sunsetbeachguy]

I didn't say it was your fault, but it should stir something up...

I particularly liked this section:

"Four: Become the master of your domain. Become one of the highly trained real estate professionals that are profiting mightily from this new paradigm. Like the previous example let's look at 2 different people. Both are recent high school graduates. One decided to attend an Ivy League school for 4 years to get a degree in one of those outdated majors like engineering or one of the sciences. After graduation they attend grad school for 5 years and get their Ph.D. And now after 9 years of hard, menial, drudgery, what do they get as their reward? A job paying $50-60,000, if they are lucky. By the time this "genius" pays off their student loans they'll be 40 years old. 22 years of eating ramen and riding your bike to work might make some drugged out hippy happy but for us real Americans we want $$$. Now let's look at his friend. He decides college is for suckers. He works as a mortgage broker and part time real estate agent. He earns $100-200K a year. By the time Harvard boy has graduated our wise mortgage broker will have a BMW, 2 houses, and a sail boat. And he did all this without wasting his time with books or filling his brain with useless knowledge. He is a producer of wealth while the self-absorbed academic is a parasite on society. What would you rather be, a producer or a parasite?"

Or the ever popular 'There are no bad neighborhoods in California"

"As the numbers above show after 5 years of 20% increases you'll have $450K in profit. Let's say you get robbed twice a year, average cost of $5K per robbery, and stabbed or shot every 2 1/2 years costing you $50K in lost wages/hospital bills. $450,000 - 2*5*5,000-2*50,000 = $300,000 PROFIT. I don't know about you but I will take the occasional shiv in the back for $300K every 5 years."

"Note: I left out family members being murdered because with proper insurance there should be no net loss for this event. In fact, it could be an equity building opportunity if your loved one had large amounts of insurance."

I don't think Peter was active on the housing bubble blogs in 2005 or 2006 when variants of these arguments were used by permabulls in a condescending tone to "debunk" the housing bubble hypothesis.

I think the arguments are even funnier now that the truth is fairly widely acknowledged.

[Dr. JwB]

"As camels prove there is no housing bubble."

[Pete Viles]

Tex wrote, "Um, that blog is a joke, right?"

Yes. Maybe I should have made that more clear. It's a joke.

[ray]

Not as funny as a mortgage company willing to loan money to people who have already gone through 2 or more foreclosures during the housing boom.

Even funnier still, is the debtor "walking way" because of foreclosure and having their credit score go from 300 to 200 - and having the debtor say who cares.

HaHaHa! HoHoHo!

[MyLessThanPrimeBeef]

Let's say you do something wise, say you sell your home and you go to Vegas to play blackjack with $500,000. This beautiful and desirable game will net you about 50% per year. Therefore after 30 years the game that the homeowner unwisely turned his nose up to will get you a little over $1 trillion or some ungodly number even bigger. And in about 1,000 years, you will have more than googol dollars and more than googolplex dollars in a 1 million years, more than the number of atoms and tiny little vibrating strings in the whole universe.

[Ruth]

Quoth Pete: "Still, I don't think half a million is too much in LA. If you're earning 100k, it's worth a crack... (if not and you never will, get out of LA)."

If everyone not making 100k moved out of LA, there would be no one to serve you coffee, wash your car, dry clean your clothes, or sell you furniture for your overpriced house. And it would serve you right, with this kind of attitude toward people who work every bit as hard as those making far more money. You should be ashamed of yourself.

[Another]

Funny and sad at the same time. Note the common thread throughout of "rule of 20% appreciation".

[frank carter]

Talking from experience if you want to buy a reasonable home, and I mean a reasonable home buy the blue prints at home depot or better yet the public library. Put an add on the a paper that you are hiring workers to put a foundation on your property etc....and little by little you have a home and its all yours...the builder is making all the money, why don't you become the builder...I never build a home in my life...there were plenty of people that know how and how they come on running to help me...just have the land, and the bank will land you the money to build your dream home.
I say baloney!!!! paying a half million dlls on a home that probably cost a third to built...just take the initiative, there nothing to fear but fear itself...

[DMC]

Frank Carter at 1:33 PM I find your idea very intriguing. However, doesn't a builder take care of things when they go wrong under a warranty? Maybe the savings from your method would cover unexpected repairs, but I think most people want someone to go to/blame when their roof is leaking. That said I wonder if it is a realistic possibility to do what you describe.

[tag heuer]

"Actually, US homes are cheaper now, in 2007, than they were in 2001...if priced in euros"

This idea intrigued me enough to do my own google search. In Nov. 2002, 1 US Dollar roughly equaled 1 Euro. In Nov. 2007, 1 US Dollar = .67 Euro. So, if you are from the EU and you bought a house in the U.S. in 2002 for $400,000 (roughly 400,000 Euro), what would that house be worth in 2007? If the current market says that house is worth $700,000, then it would only be worth 471,000 Euros...

I know very little about economics, so what do these facts actually mean to the U.S. buyer ?? To me it looks like healthy appreciation.

And if prices drop 40%-50% like all the doom and gloom renters on this blog, wouldn't we be facing the next Great Depression if the dollar keeps dropping too ?

[anon]

Tag heur,
Here's the breakdown 2001-2007
Euro was .86 dollars in 2001.

Median US home price DOWN 23% 2001-2007:
Median US home price 2001: 213,000 Euros
Median US home price 2007: 163,000 Euros

Bay Area up 1% however
SFO area Median 2001: 460,000 Euros
SFO area Median 2007: 465,000 Euros

SDO median home prices down 1% from 2001-2007
2001: 340,000 euros
2007: 336,000 euros

Once again:
No housing "bubble" if priced in euros.
Just a dollar devaluation that was only reflected in frivolous things such as oil, healthcare, college education, precious metals and housing.

[ronwriter]

Confusing "producing wealth" with "being productive" usually ends in debacles like Silverado, Enron, and the Rigas boys. Now it seems to have spread to Chinese toothpaste and toys. Who are the real parasites?

[Contrarian2day]

Las Vegas Housing Bubble Update:

http://economicrot.blogspot.com/

BOTTOM LINE: When tourism starts to wane, due to people running out of discretionary cash, gaming/hotel industry layoffs will follow, cascading the impacts of the already doomed Valley housing market, as more locals will be unable to meet their monthly mortgage obligations. Reduced spending levels, increasing layoffs, magnified home foreclosures and tightening credit conditions will cause a doubly painful domino effect on the Commercial real estate market and in due time, the impacts will be extremely painful to the entire economy. State Tax revenues will tank, crys for budget cuts will prevail and the government layoffs to follow will only exacerbate/compound the situation.

I think one of my readers summarized the situation best: “ Las Vegas lives off the margin. Good times, fat margins; lean times, no margin. LV has no plan B, there's nothing to take up the slack from a decrease in visitor volume. Even dollar rich foreigners aren't going to hold up employment that is based on a volume service industry and housing construction.”

Guess only the future will tell...