It's Too Late
For those of you that have followed my previous economic stories, this should not come out as a surprise, but the Financial Times publishes yet another pessimistic article about the US economy.
Today's installment is quite explicit: Property could fall like a house of cards
Nout Wellink, president of the Dutch central bank, last month warned that a hangover from the property boom could well exacerbate the next downturn. Both the Dutch experience and the history of housing booms suggest that this counsel deserves to be taken seriously. However, it is probably already too late for the leading Anglo-Saxon economies to escape lightly from the consequences of their property bubbles.
In the late 1990s, the Netherlands had one of the most successful economies in Europe. At the time, both Dutch house prices and household credit growth were rising at double-digit rates. As homeowners cashed in on their burgeoning home equity, the Dutch savings ratio collapsed (from more than 13 per cent of income in 1997 to less than 7 per cent three years later).
The Dutch housing market cooled after interest rates began climbing in 1999. The following year, house-price inflation came to a halt. Household credit growth slowed simultaneously - mortgage equity withdrawal fell from €10bn ($13bn) in 1999 to €5bn in 2002. This had an adverse effect on consumption. As consumer confidence dipped and unemployment climbed, the Dutch began to save more. Three years after the end of the housing boom, the economy contracted.
(...)
Contrary to popular perception it is not necessary for house prices to fall to create a serious problem for the economy at large. When house prices merely cease rising, the rate of credit growth normally slows, inducing householders to save more and spend less. At best, this produces a mild drag on the economy, as has been the case in the Netherlands. At worst, the economy undergoes a severe slowdown with soaring unemployment and a painful recession - as occurred in Japan, the UK and Scandinavia in the early 1990s.
Note this - you need perpetually increasing housing prices to support consumption when such consumption is not based on growing wages (stagnant in the US for the past 2 years) but on increasing asset prizes being monetized through equity withdrawals and mortgage refinancing on increasingly aggressive terms.
Even if prices stop increasing, you get economic pain: consumption slowdown, stagnant economic growth, with all the usual consequences: higher unemployment, bankruptcies, higher budgetary deficits as tax revenues decrease.
But it is not just borrowers who are hurt by a housing market collapse. Rising levels of bad debt inflict damage on lenders' balance sheets. This often leads to a credit crunch and sometimes to a full-blown banking crisis. The failure of the Bank of United States in 1930, for instance, during the Great Depression, was due largely to losses on property lending. Furthermore, as over-indebted households cling tenaciously to their homes and lenders delay the politically unpopular and costly process of foreclosure, the banking system may have to deal with the aftermath of a housing crash for many years.
Remember also that houses represent the biggest share of US assets. For most people, their home is their single biggest asset; and their mortgage their single largest financial commitment. Should a serious economic crisis hit, banks will be seriously hit along with many of their clients, especially when they have provided highly leveraged financing (like the 30-year, no principal repayment, interest-only-in-the-first-few-years loans provided in some markets). And banking crises cost a lot of money in bailouts, and always have the risk of a systemic crisis (when there are bank runs or at least a massive loss of trust in the financial system). Furthermore, many of the recently invented financial instruments (like CDOs) have NEVER been tested through an economic downturn.
Government finances commonly deteriorate after housing booms end, as fiscal policy is employed aggressively to prevent the economy from slumping further. Since the end of the property bubble in the early 1990s, Japanese government debt as a percentage of gross domestic product has more than doubled and currently exceeds 160 per cent of national income.
That's actually the worst part: housing market slowdowns have massive negative consequences for government budgets, which suffer mightily form the downturn. If you think that the budget deficit is bad, think what it will be like after that... The Bush administration has used up all reserves and spent recklessly despite benefiting from a supposedly strong economy.
It's REALLY a house of cards. The recent apparent economic growth has been obtained by throwing massive amounts of money at an economy increasingly unable to absorb it (to invest) - that money has thus been spent, either in the total waste that the Iraqi war is, or on a growing volume of imports from China and other places. It's not growth, it's binging on plastic - and it leaves no room for maneuver when the bad times actually come, as they will.
The end of housing bubbles in other countries has been associated with periods of prolonged economic weakness, increasing financial fragility, rising government deficits and the appearance of monetary instability.
We already have this before the end of the bubble, what will it be after?
Again, the blame goes to both Bush for his reckless budgetary policies and to Greenspan for his amazingly lax monetary policy. Call him "Bubbles" Greenspan each time you write and talk about him, because that's the only way to put it. Stephen Roach, the markedly bearish chief economist of Morgan Stanley, which I quote often, has another piece this week where he wonders if there could actually be some kind of conspiracy in Greenspan's act, in view of their obvious recklessness:
Morgan Stanley's Global Economic Forum (25 April 2005)
I am not a believer in conspiracy theories. But the Fed’s behavior since the late 1990s is starting to change my mind.
In all my years in this business, never before have I seen a central bank attempt to spin the debate as America’s Federal Reserve has over the past six or seven years. From the New Paradigm mantra of the late 1990s to today’s new theories of the current-account adjustment, the US central bank has led the charge in attempting to rewrite conventional macroeconomics and in making an effort to convince market participants of the wisdom of its revisionist theories. The problem is that this recasting of macro is very self-serving. It is a concentrated effort on the part of the Fed to exonerate itself from the Original Sin of failing to address asset bubbles. The result is an ever-deepening moral hazard dilemma that poses grave threats to financial markets.
Go read the whole piece, it provides more in-depth explanations of how the Fed has dug itself deeper at every turn, by inflating a new, bigger bubble whenever the previous one threatened to burst. The housing one is likely to be the last (unless, as Sterling Newberry suggests over at dKos, the Bushistas manage to raid the Social Security Trust fund for one last binge), and it will have consequences in the real world that are known, as they have been experienced many times in many countries.
I'll let Edward Chancellor, the author of the Financial Times piece, conclude:
The head of the Dutch central bank now regrets what he calls the "artificial stimulus" provided to the economy by the housing boom. With the housing markets in the UK and the US vulnerable to rising interest rates, officials at the Federal Reserve and the Bank of England may shortly be forced to learn the same painful lesson.
Posted by Jérôme à Paris on April 27, 2005 at 10:40 UTC | Permalink
Is the Whiskey Bar now channelling David Bowie along with everything else? (Well he did do a cover of Alabama Song at one point.)
Posted by: Dismal Science | Apr 27 2005 14:08 utc | 2
Jerome
I was expecting an A380 thread with pics when I clicked here.
Well done Airbus!
Posted by: Cloned Poster | Apr 27 2005 14:17 utc | 3
Beq, to summarise my understanding of the summary and the article.
The guy believes that US and UK property prices are going to collapse, or at the very least stop rising.
If they collapse, things will get bad: consumer confidence will slump, people will be unable to borrow and inclined to pay off debts even if they can borrow, and government finances will get worse. Bush and his gang aren't going to stop spending and there will be even less tax money coming in.
Even if prices don't collapse but only stop rising, this can lead to similar results since people won't be borrowing so much.
One way for the government to defuse the situation would be to allow massive inflation, reducing the real values of the debt.
So his outcomes are deflation, unemployment, huge government deficits and problems with the financial system or inflation, unemployment, huge government deficits and problems with the financial system.
Choose your poison.
In theory it might be possible for a concerted effort by governments to navigate through the storm with just a few scratches on the hull, but that would require someone in power who could do the economic equivalent of reading a map.
Is it simply possible to hang onto what little you may have? In other words, pay down all loans and ride it out?
Well, obviously, having a sensible level of debt is always a good thing. A prudent person maintains debts at a level that they could survive even if the economy slammed into a wall moderately hard. Once you're in that situation, I don't see why you'd pay off your debts in this case: if house prices collapse interest rates would be unlikely to rise. In fact, it could be a bad thing, since you'd be paying off debts now which might be paid off much more cheaply in the future due to inflation. I'd be more worried about my savings than my debts, since their real value would also fall with inflation. If I had substantial US savings I'd be asking my financial advisor how I could diversify across the world. If I had a financial advisor.
Debt repayment would be more an issue for currency problems, which might lead to high interest rates.
does all this mean that holding bank stock is a bad idea? my father left mme quite a few shares in his favorite bank, which seems to be doing well. but in the face of a housing bubble burst, wouldn't all banks suffer on their defaulted mortgage loans?
Posted by: Hamburger | Apr 27 2005 15:07 utc | 6
Most Americans tend to disregard talk of property bubbles because property appreciation is a fact of life, a sort of natural inflation not threatened by "collapse." This view is further justified by the regional character of the bubbles.
Question: Was the mid80s S&L fraud an example of bubble/deflation?
just wondering.
Posted by: slothrop | Apr 27 2005 15:31 utc | 7
To paraphrase Laurie Anderson: 'He didn't know what to do, so he thought he would just look at what the government was doing, and scale it down to size.'
It's not just housing prices, the whole economy is based on a wide-spread belief in the 'end of days,' some because of fundamentalist belief but more because of the sense of individual powerlessness promulgated by this regime. If you have young children you might be excused for having some hope for the future. Everyone else- may as well go out dancing or at least driving a big car. That is the rational response.
'Why go to night school? [or save money]...things will be different this time.'
The parable of the grasshopper and the ant has been supplanted by a plague of locusts.
Posted by: biklett | Apr 27 2005 16:15 utc | 9
For folks who want to dive further into the house price bubble money manager Jeremy Grantham of GMO just released his quarterly remarks (PDF) with some interesting charts and thoughts on housing bubbles in UK, Downunder and the US.
In the US the median home prices as a multiple of one year household income is over history at 3.4. If the average household makes $100,000, house prices should be around $340,000. Today the factor is 4.2 i.e. house prices are 25% too high compared with long term averages of prices vs.income. They will eventually fall back to the average.
The numbers are for all the US. The housing bubble is concentrated in several areas so in those spots they are much more overvalued and will fall deeper (or stay stagnent longer).
Colman
Why?
Is them "Deananders" Denis Bergkamps?
Posted by: Cloned Poster | Apr 27 2005 16:54 utc | 11
James Wolcott also cites Stephan Roach in Bubble Trouble Dead Ahead. Housing in my neighborhood appreciated 25% in the last year. The interest rate should actually be around 6%; Increasing energy costs; Decreasing Income and a Delusional President; all point to the housing bubble bursting soon.
This really reminds me of the late 90's when everyone who dropped by the office talked about their latest stock market scheme. That suddenly stopped when the tech market crashed.
Posted by: Jim S | Apr 27 2005 17:15 utc | 12
@CP I think Colman is making a Fawlty Towers reference (wow, a pop cult reference I recognise -- increasingly a rarity).
Housing bubble is very regional. Median price of a home in my city is now $750K+ US. A 2 brm condo in a ho-hum location costs $300K and up. A friend in a different state, in a modest but fairly pleasant university town, just paid $90K for a solidly affluent middle class detached home with large garden. Factor of over 7 from one state to another. My town has been a hot-spot for real estate bubbling over the last 20 years.
The funny thing is that I blamed the most recent real estate madness (the 90's) on the dotcom boom (we are just over the hill from San Jose and Sunnyvale, and many buyers were nouveaux-papier-riches from that event) -- yet the dotcom boom went Thud but the prices never came down.
The (theoretical) equity in my home is worth more than my lump-sum pension for 30 years' labour. But I expect it won't be in another year or two. Of course if Ahnold has his way I may not have the pension either. Or if BushCo continues their economic and environmental vandalism, the US dollar may be worth the paper it's printed on in another 5 years or less.
It is damned annoying to live your whole working life according to some kind of implicit and explicit social contract, only to have that contract torn up by Visigoths just as you get w/in sight of the so-called Golden Years. Many of us who work for the University were head-hunted during the heady dotcom days, offered salaries up to twice the modest remuneration the State offers, but remained loyal largely because of our faith in the reliability and pension benefits that the U offered. In the event, we might have been better off taking the easy fast money and investing it overseas than remaining tied to a pension fund which, in USD, is rapidly losing value as well as handcuffed to domestic investments in a pithed economy. Sigh...
If I'd known the neoconderthals were going to trash the US economy this badly by the time I reached retirement age, I might not have bothered to be such a conscientious worker and taxpayer. I could have been a lifelong slacker and ended up not much worse off, if things play out as grimly as our worst fears.
Anyway, personal griping aside, I wonder whether the real estate Pop-goes-the-bubble event will vary regionally as well, and whether the worst hits will be yuppie-overvalued locales like Aspen, or the recently trashed farmlands and debt-financed trophy homes of the midwest? My strategy is to pay down the mortgage as fast as I can, pay off the credit card in full at the end of each month, and move a few thousand bucks to a Canadian bank for escape money. But I am a simple-minded peasant when it comes to finance. There is probably some far more clever strategy that I'm incapable of imagining.
Jerome, your post got a mention on Cursor.
Commenting on a story in Financial Times, which warns that 'Property could fall like a house of cards,' Moon of Alabama says, just "Call him 'Bubbles' Greenspan" from now on.
Posted by: conchita | Apr 27 2005 20:20 utc | 14
DeAnander - if we get megainflation, a real possibility, it would be to your advantage to have the mortgage debt, rather than paying it off, IF your income will inflate as the value of the dollar drops - carrying credit card debt is not a good idea, though, in my opinion
spouse and self have put some cash into a euro-denominated account at www.everbank.com - in effect, we are betting that the dollar will drop in value compared to the euro, at least to the extent of the foregone interest
Posted by: mistah charley | Apr 27 2005 20:49 utc | 16
@mistah charley - i spent some time looking at the everbank lit when you mentioned it previously. any personal experience or lessons in dealing w/ them that might be helpful for someone considering foreign currency accounts?
Posted by: b real | Apr 27 2005 21:03 utc | 17
In light of the above, I enjoyed reading the following article today, and it really made me pause, even though it's a bit dated (July 2004):
http://www.guardian.co.uk/business/story/0,3604,1253093,00.html
"The American dollar is a flawed currency and will collapse in value before the end of the decade, taking with it the prosperity of the American nation. Investors should be buying commodities - platinum, lead, wheat, sugar, oil, the sort of assets that haven't been fashionable for a quarter of a century or more. While you're at it, teach your children to speak Mandarin, the coming language of the 21st century. And don't encourage them to do an MBA: "Tell them to be a farmer and do a real job."
Lots of interesting predictions by this fellow Jim Rogers.
After reading this I thought, gosh, this was nearing a year ago, and already the environment is so much shakier. The oil factor alone gives any sensible person pause.
I called Everbank and spoke with someone there and lo, you can buy Swiss francs for a minimum of only $2,500!
And what about investing in oil? For what it's worth, here's a "winners and losers" article about who would stand to benefit if oil hits $100 per barrel:
http://www.businessweek.com/bwdaily/dnflash/apr2005/nf20050426_9234.htm
Posted by: Thaxter | Apr 27 2005 22:33 utc | 18
Maybe someone can answer this for me.
Central banks are supposed to set interest rates in part or largely to keep inflation down. If house prices are booming why isn't that being reflected in the inflation figures? In Australia the housing component of inflation is calculated only from rents, which have been flat despite some of the fasting rising real esate prices in the world. Is this the way inflation is calculated everywhere? And is there a logical reason for this?
How can house prices zoom up and inflation stay low? Shouldn't rising house prices push up inflation which naturally forces central banks to raise interest rates cutting off housing price bubbles?
Posted by: still working it out | Apr 28 2005 0:52 utc | 19
@swio, I don't pretend to understand this stuff -- so take 2 grains of salt and don't call me in the morning -- but my crude grasp on the weirdness of the US economy is that the Fed dare not raise the rates because the economy is built on debt-based consumer spending, and raising the prime rate would strangle all those naive persons who have ARMs (adjustable rate mortgages) plus hiking up credit card debts, causing a sudden dive in consumer spending and consequently a general unravelling.
however the indecent rush to pass the debt-slavery bill makes me wonder whether the Fed is thinking about just this option (raising the prime) and the credit card industry first had to be placated with the offer of neck rings and fetters for all its maxed-out plastic-card-users, who might otherwise default and take Chap 11 when the rising rate begins to bite.
The Most Important Thing You Don't Know About "Peak Oil"
Speaking of it being too late, Steven Lagavulin has a must-read here:
There's an aspect to the concept of "Peak Oil" which I don't believe is sufficiently grasped by people following the subject. It's the understanding that the most dangerous aspect we face is not really the state of the resource itself--the actual "Peak" dates or depletion rates, or any of the physical realities of oil supply/demand--but rather the reaction in the oil markets upon realization that the issue no longer even important.For instance, a few days ago I referenced the article GlobalCorp, because I felt Michael C. Ruppert did a fantastic job 'connecting the dots' of world/political events occurring over just the past few months. What he showed is that, regardless of whether Peak Oil has any reality to it or not, what is important now is that the powers of the world are absolutely steering the course of the planet by this star. As such, the events now destined to unfold over just the next year or so are acquiring a momentum of their own, setting us on an intractable course of global conflict and warfare. This is the reality, as I see it, of what is happening right now, regardless of when any theoretical "Peak Year" may have been reached.
Should the oil markets themselves begin to 'connect these dots', then all our lives are going to be impacted violently and immediately. The commodity traders for various interested firms live solely by anticipating conditions and events, not by debating them and verifying them. The old mantra is, you "buy the rumor, sell the news". This is the reason you'll never see "Peak Oil" covered by a respected media outlet. Because as soon as it is recognized that for all practical purposes the situation is already upon us, then a fast and vicious "resource grab" will be initiated. The price of oil in the markets will begin to rise dramatically. This will initiate a circular hedging / hording mentality in large end-users, governments, and multi-nationals. This will then have a myriad of devastating effects, but all average Joe Consumer is going to notice is that the price at the pump will experience a brief and dramatic blip upward, gas lines will form for a short time at the corner-stations, and then suddenly the corner gas-stations will go dry altogether...perhaps getting a few sporadic deliveries, but more likely simply for good. Gasoline will not be available to individual drivers, as precedence is given to heating oil, critical government and commercial uses, public transportation, transport of food and goods, etc. How the situation unfolds after that you can imagine just as well as I....
If this scenario sounds over-dramatic, keep in mind that what I'm talking about is a dawning recognition of something that many analysts have already come to realize: that the "oil grab" is in fact already on, that it's not a temporary 'bottleneck' or passing 'shock', and that the losers in this game will not survive. A global game of 'blind man's bluff' is underway, with all the players pleading ignorance of the issue for as long as possible so they can get their pieces in place...all the while anxiously watching for the first itchy-trigger finger that's going to set the whole thing off.
This is the reason I highlighted Michael Ruppert's last article. I believe that just as he is stating, the debate over "Peak Oil" itself is already over. It no longer matters whether it is proven or disproven, because there isn't time left to do either. Events in the world are revealing to us the only truth that matters: that a desperate resource war is emergent, one that will not be won by trade sanctions, blustering, or corporate bargaining. This is the only issue which should now be under scrutiny by those who strive to stay "ahead of the curve". No one questions why the U.S. is occupying the Middle-East: the Administration is there for the oil. But the true gravity of the situation is only scarcely beginning to come to light. The 'markets' have already accepted the long-term "bull market" in oil prices due to increasing demand. What they don't accept yet (or understand) is the mounting "supply" problem. When this begins to dawn on them, and it could absolutely happen as quickly as within the next few months, then seemingly overnight the world will start to come apart at the seams.
(snip)
In truth, nothing about the future can be known with certainty. What I am trying to do is to communicate my own recognition that the time for action is now upon us. We can no longer debate who's right and who's wrong. We can no longer hope for what the next election might bring. We can't assume that somehow a 'gradual transition' will be effected, because it is never going to happen that way. Certainly there will be efforts among the global powers to calm the markets in various ways...perhaps some of these will ameliorate matters. But ultimately, in our own lives, just as on the world stage, whomever does not act now will soon find they have already lost the game.
So what action should be taken? What can anyone do to confront the course of events? Sadly, I don't have the answers. But I am trying to work things out. I believe that the only hope of changing things is by building a consensus among people. This needs to happen very quickly, and it will only happen when people are no longer content to just grumble about things, comfortable in the assumption that nothing is going to happen...at least, not anytime soon...and certainly not today....
Also, those who secretly long for the coming collapse will be in for a shock. The initial oil shortage, when it does come, will certainly be a serious inconvenience, but the events which proceed after that are going to humble us all to the core.
Apologies for posting most of the article. Perhaps it's time for another peak oil thread?
Posted by: liz | Apr 28 2005 3:09 utc | 21
In case no one noticed, this thread got a link from cursor.org...
Posted by: jj | Apr 28 2005 5:52 utc | 22
I haven't been involved in financial markets for many years so my expertise may be a bit out of date, but when I look at the Fed Funds Rate (the important interest rate figure), it seems seriously out of line, it's about 2% when it should be over 5%. Though interest rates have been held artificially low for a number of years, it's starting to take its toll as foreign markets begin to rouse from their doldrums.
That either interest rates will rise or the dollar will fall is a certainty. If interest rates rise, the housing market, which is in fact a mortgage market, will fall. Whether it will collapse probably depends on the steepness of the rise. If interest rates do not rise, the dollar will fall, precipitating price inflation in commodities and imports from countries the currencies of which are not pegged to the dollar.
Much of the oil price rise is directly attributable to the four-year decline of the dollar which is in turn a result of said low interest rates which were necessitated by Greenspan's arbitrary hikes in 2000. (To sway the election? Surely not.)
One ignored aspect of the housing market is the fiscal health of FNMA. Should the true health be played up in media, look out. Another ignored aspect is commute costs (driving twenty miles daily is more of a burden now) which have not yet been factored in as it pertains to the prime concern of buyers, i.e., location. Suburbia may be in the worst fix because either mortgage rates rise or gas prices do.
The most reliable indicator of future housing prices is probably the spate of refinancing ads directed at Joe Average. Anyone who trades a fixed rate mortgage for a (presently) lower ARM + cash is going to be mighty rueful in a few years.
In predicting market moves, the first rule is "When everyone gets on board, it's time to get off."
My free advice (and remember, advice is generally worth less than what one pays for it) is to pay off as much of your mortgage as possible, and/or move closer to work, and/or buy a bicycle.
Posted by: cavanaghjam | Apr 28 2005 6:24 utc | 23
swio - this is actually a major economics question.
Visible consumer inflation has been kept down for a variety of reasons, including globalisation of trade, commoditisation of many products, and Chinese competition putting a downward pressure on everything.
At the same time, asset prices have been increasing rapidly. The question for central banks has been: is asset inflation actually inflation, thuis requiring intervention via higher interest rates? The Fed has clearly chosen to answer "no". Other central banks have not been so clear cut, but they have been reluctant to act very decisively ("central banks are not in the business of outguessing markets" is the usual, although silly, argument - they lead the markets with their interest rate decisions).
So yes, it is an important question.
As far as rents are concerned, they have increased as well in France (not as much as house prices, but more than inflation).
Posted by: Jérôme | Apr 28 2005 7:38 utc | 24
Thanx DeAnander and Jerome (sorry don't know how to put the accents on that).
Jerome,
I noted that you have been (quite rightfully) very critical of Bubbles Greenspan for turning the US economy into an asset bubble addict by keeping interest rates too low for too long (two seperate asset bubbles in one decade? Who is he kidding?)
But I thought it noteworthy that the Australian Reserve Bank did exactly the same thing during our even more intense property bubble here. I wonder if the problem might be more with current economic orthodoxy rather than just Greenspan. Maybe the Market Fundamentalist views that are prevalent today have so convinced policy makers of the impossibility of major market failure that they just cannot accept that asset bubbles (which are, after all, major market failures) as being real. It would contradict their belief in relatively perfect markets to accept that a very large percentage of the capital in both the housing and stock markets in the previous ten years has been misallocated.
Posted by: still working it out | Apr 30 2005 12:15 utc | 25
In researching "everbank", I noticed it is FDIC protected. Is this meaning that it is also subject to IRS siezure. If so. Any links to off shore banks that are more protected? Latin America?
Thanks all.
Hope we can all ride it out as it's coming.
Dave
Posted by: Dave | May 1 2005 17:34 utc | 26
http://www.prudentbear.com/archive_comm_article.asp?category=Guest+Commentary&content_idx=42561>Asset Bubbles -- a commentary from a web site with an honestly advertised bias (prudentbear).
The part of this op/ed that I really understand on a gut level is that "wealth creation" through the inflation of paper value of assets is illusory. Real wealth is land, food, shelter, toolage -- the capacity to make stuff, the capacity to support life. Land can be improved by labour, food can be "created" by labour plus land plus functioning biotic systems, shelter can be created by labour plus raw materials, tools can be created by labour plus raw materials and give us the leverage to create food and shelter and more tools, more efficiently, etc. But the "wealth" that is "created" by the artificial valuation (in cowrie shells or dollars) of assets makes no sense to me. You can't eat it, you can't live in it, you can't cook with it; it appears overnight without anyone's labour creating it, and it disappears overnight without anyone's labour being able to preserve it. It ain't real.
Heat is work and work is heat, but what the heck is "asset value" when it's at home? just a collective fantasy. Seems like a lot of human effort and cleverness goes into the maintenance of these huge, highly structured fantasies and arbitrary rulesets like (imho) organised religion, abstracted money economies, etc. If we put half that effort into the problems of creating and maintaining real wealth, we'd be better off right now... or maybe I'm just a peasant and don't understand the high-flown discourse of my "betters" :-)
Anyway, the drain under the double sink in the kitchen has rotted through at last, and I must apply some toolage and my nifty primate opposable thumbs to the problem of wrecking it out and replacing it. can't hang about the bar -- time to get dirty and curse the previous homeowner. It doesn't matter what the inflated "asset value" of the house is, the drain still has to get fixed :-)
Hello everybody. I'd just like to make one thing clear. Keep in mind that in the United States, one of the main component of our housing bubble is investment activity. When housing prices do come down, they will come down quicker than before because there hasn't been a more speculative housing market since the birth of the US. When it hits the fan, brother, I wouldn't want to hold on to real estate. I predict housing prices will cool off sometime in the fall for the United States, and in some parts, we may even see a decline of ten percent.
Posted by: PresidentClinton_is_the_man | May 4 2005 3:29 utc | 28
The comments to this entry are closed.
Thank you, Jerome. I have waded through all this and have no hope of understanding it. Is it simply possible to hang onto what little you may have? In other words, pay down all loans and ride it out?
Posted by: beq | Apr 27 2005 12:56 utc | 1