Can Wall Street withstand weak housing?

Business Week Online ^ | September 19, 2006 | Peter Coy

[GodGunsGuts]

Can Wall Street withstand weak housing?

Some experts say real estate slump may spell trouble for equities

ANALYSIS

By Peter Coy BusinessWeek Online

Updated: 1:28 p.m. PT Sept 19, 2006

If your nest egg is made of 2-by-4s and you're watching the real estate slowdown with a mixture of fear and nausea, then this article is for you.

The question: If real estate tanks, will stocks follow? Or will the market ignore housing? Or maybe — just maybe — will a decline in housing trigger a rise in stocks? It's something you really ought to think about if you're trying to figure out where to put your money.

[On the Road to Serfdom]

Usually space considerations are reason not to go down to zero but in the graph they could have put the text under the line as the line would be then flatter across the top, showing the actual undistorted graph. That they chose to unecessarily distort the graph is not good.

[Mase]

From your chart, it looks like real estate became more valuable in 1997 after the government changed the tax laws allowing for a capital gains tax exemption on the first $250K earned for single homeowners and $500K for married couples. But I guess that fact just detracts from the irrational FR housing bubble mania.

[GodGunsGuts]

Don't be a hypocrite. I'm no more anonymous than you are. And yet, you keep talking down gold while talking up other investments.

[GodGunsGuts]

Sad, but true.

[RobRoy]

I heard during the stock runnup of the late 90's that housing and the stock market compete for dollars. When one is up, the other is experiencing downward force, and vice-versa.

Problem here is that this currently popping housing bubble is being described more and more as a credit bubble, which means that if everyone is tapped out, they aint gonna buy anything, which is usually not good for the stock market.

I dunno. Gimme another beer.

[RobRoy]

>>But this time it is different!<<

Looking at the chart, all I can say is - apparently.

[jdsteel]

LOL! You are kidding me right? LOL!

Kidding about what part? That an average home was smaller in the past? That someone from Yale might desire a certain political spin? I'll give you another knee-slapper then: "location, location, location". Certain areas of the country are skewing the national average. Areas like Washington, NY, LA, San Diego and Atlanta may have a local "bubble" that much of the country does not have. How's that for hilarious?!?!

[RobRoy]

Have you ever flown over the US. The availability of land is not an issue - yet.

[GodGunsGuts]

Why do you heap such disrepute on those who are honest enough to acknowledge that precious metals are in a bull market? What's your angle? Why do you keep "shilling" for the anti-gold crowd? At least we are honest and open about stating the case for PMs. What's your angle? Why do you bash Gold Eagles, but never explain *why* you are ALWAYS down on PMs no matter what? There must be something motivating your seething hatred of precious metals and PM stocks.

[RobRoy]

Well, you can lead a horse to water...

[GodGunsGuts]

I think your right on the money. But don't forget all the people who will foreclose as interest rates rise. I'll see your beer and raise you a beer :o)

[lawdude]

What a bunch of garbage. Even the McCain scandal (Keating) of the late 80's and subsequent distortion of an otherwise healthy housing market didn't kill the DOW.

[RobRoy]

>>This makes the ups and downs appear much bigger than they really were, especially to someone who just glances at it.<<

Actually, in business intelligence software you often WANT to do that, to show decision makers the important trends that may be otherwise masked in tiny "bumps" in a chart.

Rack this up as comparative/relative info. Your actual mileage may vary.

[SF Republican]

My poorly made point was in highly populated areas where people actullay live they are making no more land; it was a phrase my father used often and I shall not use again.

[RobRoy]

"(1) The 1890 housing market and the 2006 housing market are not identical."

That is so true. Did you notice that data from the period between those dates is included in the chart. What interests me is how this run up compares to other run ups.

[wideawake]

Foreclosures will become increasingly rare.

Banks would much rather get some money out of debtors than go through the legal annoyance of seizing a property for collateral and trying to sell it into a softer market.

What banks will do with 5 year ARM holders is give them a 30 year fixed.

If you were a banker would you rather have 10,000 houses to sell, with 10,000 hearings, 10,000 closings, etc. - or would you rather change mortgage terms that will result in your bank getting paid more moeny over a longer period?

[Petronski]

I offer no investment advice, other than to be very wary of high-pressure sales pitch bombardments.

[wideawake]

As another poster noted, runups are more dramatic when you do not grpah with a zero y-axis.

[Petronski]

Don't take it personally. Goldbuggery has been around on FR since at least 98. And when one goldbug is banned, another is assigned to take his place.

T'was ever thus.

[RobRoy]

Having been in IT since 1982, I am still waiting for a wild card to be played in this housing market thing that has been "on the horizon" for some time. It needs to clear certain technological and social hurdles before it can be viable on a large scale, but IF it does, it would really throw a monkeywrench in this whole thing.

The wild card is large scale telecommuting.