Japan Land Prices Fall for 10th Year

Associated press ^ | 2 Aug 02 | staff

[RightWhale]

TOKYO -- Land prices in Japan tumbled for the 10th consecutive year in 2001 as the stagnant economy again failed to ease the hangover from 1980s real-estate speculation, the government said Friday.

The average price of land dropped 6.5 percent during the year to $1,084 per square yard, the National Tax Agency said. That is higher than the 6.2 percent drop in 2000 but lower than the 7 percent decline in 1999.

A few plots, however, retained their sky-high value.

[hinckley buzzard]

This has happened in HongKong also, as a matter of fact. First the stock bubble, then the real estate bubble...

nah, can't happen here...although figures from the State of Florida showed new housing starts totally flat in June. No growth. In Florida. Something to chew on.

[hinckley buzzard]

What will Citigroup do with subdivisions full of homes...?

They will auction them off for dimes on the dollar, which will kill the market everywhere they go...which is about everywhere...and take losses which will screw their shareholders in the meanwhile.

Thanks Robert Rubin wherever you are...clintonoid pig.

(Disclosure: I do not hold nor have I ever held, stock in C.)

[Mortimer Snavely]

Japanese real estate is screwed. If you buy a piece of land and build a house on it, you don't improve the value. If you buy an old house and renovate it, you don't improve the value. If you move Buckingham Palace over brick by brick and rebuild it on a piece of Japanese real estate, you don't improve the value; the piece of land will be worth the same as if a corrugated sheet metal shack was built on it.

In the free world, real estate is the poor man's way to wealth. Not so in Japan.

For an interesting look at what an American went through to get a house built in Japan, click here:

BUILDING A HOUSE IN JAPAN--CREDIT AND CHICANERY

[Nuke'm Glowing]

Thank you for supporting my point. The cash from the banks to finance these massive subdivisions is beginning to dry up in Florida because they are in trouble on several fronts. We have tracts in the West Central area of Florida approved for 10,000 homes plus. But at $200,000 plus per home, and a declining economy due to the tourism crash, who can afford to buy them? Stock Brokers??? LOL

[Southack]

"You can not have price increases where values literally double every 5 years and expect it to continue forever. And salaries are not keeping pace with the price levels of many of these new developments."

That would be true in a zero-sum world, but that's not the reality that we live in.

Salaries do NOT have to keep up with the price levels of homes.

How can that be, you ask?

Easy. Lifestyles change.

First, we sent our wives to work. That's kept up our standard of living as well as our home prices.

Next, we started having fewer children.

Finally, we started leasing out our own rooms from our homes (in the areas under discussion - that really isn't necessary in my region).

Look at coastal areas of California. Everywhere you look, the streets are packed with parked cars.

Why? Because people are violating the zoning laws by leasing out their garages, attics, and bedrooms. Multiple families are now living in what old-timers would call "single-family dwellings".

So the streets are packed with parked cars because the parking was developed back when only 1 nuclear family lived in each house.

And there are more than 1 family living in each house in those areas because that's the only way that they can afford to live there.

People are metaphorically sacrificing their standard of living on the alter of "I've got to live in a hip/cool neighborhood at any cost - style philosophies".

They are also having fewer children. Why? To save money and time to help prop up their standard of living. We see this in spades in Japan today.

Supply versus Demand. Salaries aren't part of that equation. If/when salaries don't keep up with real-estate, you see the wife going to work, fewer children, and rooms getting leased out.

And that's not going to change unless people suddenly decide that they want to live in areas that permit higher standards of living on lower salaries.

If you want to watch a real-estate bubble burst, then simply look for areas that have declining populations. It's pretty tough to keep up real-estate prices, no matter how high the salaries of those who remain in the area, when the net population of that area is declining.

Conversely, it's pretty hard to drive down real-estate prices when the population of that area is increasing.

If you aren't looking at the population trend, then you won't accurately predict what the housing market will do, no matter how well you guess at the current and future states of the economy.

[RightWhale]

That's a fairly accurate observation for Fairbanks as well. Cabins and houses seem to have more people in them. There may be a few new structures here and there, but the building boom of a couple years ago has flattened out. There sure are a lot of cars around, easily double what it was five years ago, yet the Bureau of Census says population is holding steady. Also, the pupil enrollment at k-12 is holding or actually decreasing. We are not seeing an increase of child-bearing families, but people are flooding in, perhaps anticipating another oil boom, and enrollment at the university is up, up, and up.

People want to buy homes of moderate price, they are desperate to buy homes, but in the meantime they rent and share rents.

Official numbers don't agree with my observation, and I think they aren't getting the picture right.

[Red Jones]

bump

[Nuke'm Glowing]

Yes, but you haven't answered my arguement of this price inflation being created by a credit infusion that is government backed as stated in earlier posts. Government interference distorts the supply-demand curve, thus infusing variables which have sometimes opposite reactions to the desired effect in the long term. You can not use traditional economic models to predict economic development in any aspect of the economy, especially housing, when a credit bubble is created by the government through ficticious accounting. Fannie Mae is only as good as the defecit the Treasury backs. When the Euros and Asians sneeze, our housing market eventually, as a result of their withdrawl from the commercial market will give the residential credit supply a very severe cold.

[Nuke'm Glowing]

A follow up to your observation. How can anyone trust the census now that it has been politically skewed by the Bush I and Klintoon administrations? If I were a Director of Statistics at a major lending institution, I would advise against so, that's for sure.

[Iconoclast2]

Bravo. If only all Americans understood simple economics.

[Dems_R_Losers]

Best way to start an implosion would be for the government to go after Fannie and Freddie like the Clintons did to Microsoft. The witch hunt has already started, that's why the stocks are down during a roaring mortgage market. Fannie and Freddie do not represent the government pumping up the housing market. They are a two-headed monopoly, just like Microsoft, and just like Microsoft, they are helping the economy. Only the politicians can screw this up, and they seem to be ready to do it. They will never learn.

The bankruptcy bill will help Citigroup. They will be able to get more deadbeats to pay off their credit cards, probably by getting CitiFinancial home equity loans, for which they will rake in even more fees. Many, many people have lousy credit but are sitting on a ton of home equity.

[Southack]

"Yes, but you haven't answered my arguement of this price inflation being created by a credit infusion that is government backed as stated in earlier posts. Government interference distorts the supply-demand curve..."

Wasn't the example that you gave of "government interference" that Florida allowed developers to build (overbuild) too many homes??

If so, then prices went down on Florida houses, right?!

Ahhh, but prices didn't go down in Florida. OK, so now you drop the "government interference" argument in favor of an "easy credit" argument.

But "easy credit" can be spent anywhere. It doesn't have to go into housing. Home equity lines can be used to buy stocks, gold, cars, drugs, or even hookers. So just because we have easy money doesn't mean that housing prices have to go up.

No, it has to be something else.

Supply versus Demand. When the silver runs out of the Colorado mine and the town dries up, the prices for homes in that town drop.

Now build a studio in that town and start filming movies using the old main street as a set, and the price of houses there goes up. Add a ski lift and the prices of homes explodes updward.

The difference? Not government policy. Not easy credit.

No, the difference is that when people leave a town, real-estate drops in price, and when people move into a town, real-estate goes up in price.

Pretty simple.

This is why high school drop-outs, who understand and act on that simple fact, sometimes find themselves becoming real-estate millionaires while Ph.D's sometimes find that their pet theories won't pay their rent.

How can the price for homes remain high when everyone leaves a town?

How can the price for homes stay low when a town doubles in size overnight?

Supply versus Demand.

Watch where people are moving from and moving to, and you'll see home prices adjust accordingly.

[RightWhale]

How can anyone trust the census

In this region people go out of their way to avoid being enumerated. Bureau of Census has many problems here. For example, in the last national census, they send field reps five times to my house to ask where the house next door was. It's a tree-covered vacant lot and has been for 10,000 years. But they ignore the gravel extraction operation with a trailer town on the property. Bureau of Census also insists on using their own maps, which are based on USGS maps from 1924 and refuses to look at infinitely more accurate maps prepared by the local government. Many problems, census has no clue.

[AdamSelene235]

Best way to start an implosion would be for the government to go after Fannie and Freddie like the Clintons did to Microsoft.

I'd love to see them apply the Microsoft monopoly criteria to Fannie and Freddie. Equal protection before the law, dammit.

The witch hunt has already started, that's why the stocks are down during a roaring mortgage market.

The housing bubble is being used to hide the stock bubble. How long can we play hide the pickle? How else can you have strong consumer spending during a recession?

Fannie and Freddie do not represent the government pumping up the housing market. They are a two-headed monopoly, just like Microsoft, and just like Microsoft, they are helping the economy.

Oh yes they do. You see you create easy money for the housing market, which artificially inflates prices, which "increases" the value of your real estate portfolio, which allows you to create more easy money for the housing market.

When this process kicks into reverse it will destroy wealth even faster than it created it. Houses are no longer places to live but rather speculative instruments.

Only the politicians can screw this up, and they seem to be ready to do it. They will never learn.

Yep, the GSEs are a gift from our old pal FDR. Other include Social Security, the BATF, criminalized gold, etc, etc.

[AdamSelene235]

Bravo.

Thanks.

If only all Americans understood simple economics.

Interesting scenario, I'd imagine the government would exist for 5 maybe 10 minutes.

[AdamSelene235]

People are metaphorically sacrificing their standard of living on the alter of "I've got to live in a hip/cool neighborhood at any cost - style philosophies".

Good points, as usual, southack. But I object to this one. While this is a factor, its not the primary one, usually people are attracted to places like Cali, Colorado, etc. because of the JOBS. For whatever dumb reason there are high densities of venture capital and highly skilled labor in these areas. Yes, there are some trendy neighborhoods, but the primary motivation is the jobs.

[Southack]

"I object to this one. While this is a factor, its not the primary one, usually people are attracted to places like Cali, Colorado, etc. because of the JOBS. For whatever dumb reason there are high densities of venture capital and highly skilled labor in these areas. Yes, there are some trendy neighborhoods, but the primary motivation is the jobs."

My company goes out to San Francisco now and again to man a booth for job fairs... to recruit laid-off dot-com talent from there to come work in Alabama.

In my limited experience, I've seen lots of "for lease" signs on the downtown SF job scene, rather than many "help wanted" signs.

But perhaps you're right and I'm just looking at high-tech jobs rather than the overall job market. Lots of California's population growth is no doubt due to foreign immigration, and that's not generally associated with the high-tech positions that I fill, so my experience is probably a bit skewed.

[AdamSelene235]

In my limited experience, I've seen lots of "for lease" signs on the downtown SF job scene, rather than many "help wanted" signs.

Well, you don't put out "help wanted" signs for the type jobs I'm talking about.

I'm an experimental laser physicist. About 80% of the job ads I see are in Californication.

Its annoying. I refuse to live there. Unfortunately, Colorado is getting Californicated as well.

You wouldn't believe the real estate speculation that goes on here. I know grocery clerks who have 3 homes they purchased with equity from the shack they bought for 80K in 1990 but is now worth 250k$ on paper.

[Southack]

What has the overall level of population in Colorado done since 1990?

[AdamSelene235]

What has the overall level of population in Colorado done since 1990?

Its gone up quite a bit, I don't deny this factor. However, also increasing are burdensome zoning regulations, impact fees (in some case 25% of the sticker price of the home), construction caps, affordable housing programs, etc.

I think parts of Colorado are a bubble on top of the nationwide GSE bubble. There are many reasons I rent. The bubble is beginning to pop here. The is an unbelievable glut of office space, and finally rents are starting to fall. Still its $800/mon. for a 1BR 600 ft. apartment. We have a long way to fall.

Having a average home value of 275K$ with 15% appreciation per year when the average salary is $50,000 isn't sustainable. I think we have overshot a wee bit.