It may as well be the Anbar province.
Posted on 05/03/2008 10:25:47 AM PDT by SeekAndFind
It may as well be the Anbar province.
The chart ignores the 500k exclusion of income. This raises the baseline.
-—”5 Bed, 3.5 Bath; 4,080 Sq. Ft.; 0.38 Acres; $264,900 (probably overpriced by about $30k)”
Yeah, but who would want to live in OHIO?
I’d much rather pay $750K for a 3 bdrm California coastal condo.
“They will go down until the average buyer for the average house in an average neighborhood that has an average job for that neighborhood can actually afford to pay a down payment AND principal AND interest at a fixed rate each month without going bankrupt.
Until hoses prices go down to that level, the houses prices may bounce up and down all they want above that level but those houses will remain unsold.”
Unquestionably correct! The average family fella can’t handle a $2K a month mortgage and car and gas and health insurance and college for the 2.25 kids...its just all still just too expensive.
...And spiraling property taxes rigged to the cost of inflation as they are in Ohio.
These clowns are dreaming if they think otherwise.
I love the huge swings in the weather in Northern Ohio. I love the winter and the snow. I love Lake Erie. I've been to California and other places where the weather is always 'nice' but that's not for me. A year without a house-shaking blizzard wouldn't be as fun. I love watching the plants make a comeback in spring as they are doing now. I love having my own yard and a workshop to play in. I think a condo would drive me nuts. But hey, folks are all different. I'm very happy here.
I don’t understand this housing price graph. My parents bought a home in 1959 and sold it in 2001 for about 13 times the price they paid. As the difference in no way is reflected in this graph, does that mean that the difference was really mostly illusionary due to inflation and the loss of value of the dollar?
Interesting post.
Where would you recommend people invest their money for the next few years to get a modicum of return?
The graph plots prices in "constant dollars" that are adjusted for inflation. The benchmark chosen was average house prices in 1890 paid for in 1890 dollar which is set at an arbitrary "value" of 100.
The 1890 Dollar was chosen because 1890 is the year at which the chart starts plotting.
A house price value of 120 on the graph means that house prices, adjusted for inflation, are 20% increased from 1890 and a house price value of 80 on the graph means that house prices, adjusted for inflation, are 20% decreased from 1890.
To "adjust for inflation" you use an Inflation Calculator.
Any price difference brought about just because of inflation is factored out.
Let's look at your parent's house in 1959 and pick a price for 1959 of, say, $10,000 to keep the math simple.
Plugging the numbers into the Inflation Calculator to compare the years 1959 and 2001, you get the answer:
"What cost $10000 in 1959 would cost $60423.82 in 2001. Also, if you were to buy exactly the same products in 2001 and 1959, they would cost you $10000 and $1681.46 respectively."
So, with inflation alone, the price difference between 1959 and 2001 should have been only six times more.
Since the house sold for 13 times more in their area, the actual inflation adjusted cost of your parent's house as compared to an 1890 house doubled (and a little bit more) between 1959 and 2001 and so the value on the graph would be a little over 200.
The graph shows that, in America as a whole, the 200 value was reached in the year 2006. So, your parent's area was five years ahead of the rest of America in house price increase.
I’m sorry, I don’t like to give out that kind of recommendation. I don’t know your risk for tolerance, your age, your responsibilities, assets, liabilities, etc.
A financial adviser needs to know a whole lot of personal information about you to make a competent recommendation. I’m not a financial adviser and I don’t like to make off-the-cuff recommendations.
BUMP TOO!
re: the mass awareness that real estate can go down:
You’re so right. Prior to this downturn, even here on FR, there were people claiming that real estate was special; that you lived in it, etc. I kept saying that RE is just another asset class and like stocks, or bonds, it can down down in value. Many people seemed to either not want to believe this or thought that their real estate was special.
I think that there hasn’t been enough study of the impact of the housing downturn on the economy and at this point, I think it will be a longer lasting and more far-reaching impact than most estimate at this time. We’re already seeing impacts in ad valorem tax receipts. In southwestern cities like Phoenix and Las Vegas, the depth and severity of the housing downturn is going to affect major, major public works projects.
In the post-2002 economic upturn, housing was responsible for an outsized proportion of the jobs created. Many of those jobs aren’t properly accounted for in the economic stats, because so many of them were filled by illegals, and as a result we’re not seeing the full impact (yet) of the housing collapse on the economy nationally.
The other thing that hasn’t been accounted for (yet) is how much consumer spending has been made by extracting “equity” out of houses with HELOC’s. As HELOC’s are frozen, the consumer’s spending power disappears.
Wrong. Try again.
eating up about 40% of income.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
This is what reveals the stupidity of the author. Forty percent is way too high and far above historical norms. It means working twenty weeks a year just to have a roof over you. Does that sound like a bargain?
The cornerstone of capitalism is debt. Debtor is a slave to the lender.
If the slave dies or gets a broken back whos fault is that ?
If the slave escapes, whos fault is that ?
If the slave owner ( the US capitalist system) cannot feed the slave ( produce jobs that pay but insted gives them to illegal aliens or foriegn manufacturers) and the slave starves ( goes bankrupt) or the slave owner beats the slave ( taxes, inflation, sudden spikes in utility monopolies like gas ) .....whos fault is that ?
I could see, through a glass half empty, the USA spiraling into third world despair, all because of greed and the failure of the US government, not doing it's job to make wise moves to protect itself and its citizens from economic collapse, to wit: immigration, trade deficit, excess foolish regulation (environmental), overtaxation....to name a few
sorry, forgot to add the [sarcasm] tag after the japan analogy .....BTW that did actually happen in Japan
I’m just interested in an over all picture of what is going on out there.
Perhaps you could do some theoretical discussion, if you don’t feel that is likely to adversely affect some people to run out and give their money to a shyster.
For instance, young married people, with average income, starting a family, who have inherited some money and stocks.
Middle aged people whose children are now through college and want to spend the last 15 years before retirement investing for their retirement.
Older people on social security who have nice nest egg and stock, but aren’t getting much interest return now on their bank CD’s.
If you think other examples would be more enlightening, feel free to improvise.
It’s an imposition I know, but you sounded like someone with a clearer view of the reality out there, and for political reasons, I am interested in knowing what people are facing out there now and what reasonable choices they have.
Someone said that it was a stupid waste of money for people to buy houses in the last five years. I would not have known that because the experience of the last half century has been that a home was a good investment for a family.
What other misinformation and misconceptions are prevalent now that can cause people to make big mistakes with their money? Perhaps you could just limit your answer to that if you are uncomfortable looking at some average situations like I have suggested.
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