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.

[dennisw]

You have an excellent take there but everyone has a car these days compared to 20 years ago. This can account for some of the cars you see. Back in 1970 is was not so common for a family to have more than 1-2 automobiles. Am I wrong?

Cars are everywhere with all kinds of unqualified drivers behind the wheel. These autos are parked on the streets you refer to.

[Southack]

There is no financial reason to rent.

Pause.

Think about that fact for a moment.

People rent to maximize either their lifestyle or their convenience.

But people can't afford to buy these homes in my area, some say! That's no reason to refrain from buying.

What?!

One can purchase and live in an RV, mobile home, or house boat from a low-cost-of-living area, and then one can move that home into the high-cost area, for instance.

But I don't want to live like that, some say!

No problem, then rent.

Just don't claim that you can't afford to own when in reality what you can't afford is to own the lifestyle that you want.

The difference isn't subtle.

In reality, people can't afford to rent. Their entire rent payment is non-recoupable. They get no income-tax deduction from renting, and they build no equity while renting.

People don't get rich by burning money like that every month. A person's rent is typically their largest single monthly expense. It's tough to get rich when you are burning your largest individual cash outlay each month.

If more people are moving into your area than are leaving, then buying a fixed-location domicile is a safe bet. If more people are leaving, then buying a mobile domicile is the odds-on bet (financially).

If you can't afford your own home, perhaps you can afford half of a home. If so, find a partner and purchase a duplex, or find three partners and purchase a fourplex if you simply must have a "Real" house. Otherwise purchase a more mobile form of home (e.g. houseboat, RV, mobile home, et al).

But whatever you do, get out of the rental trap.

[AdamSelene235]

People rent to maximize either their lifestyle or their convenience.

Or to avoid losing their shirt in a housing bubble.

But people can't afford to buy these homes in my area, some say! That's no reason to refrain from buying. What?! One can purchase and live in an RV, mobile home, or house boat from a low-cost-of-living area, and then one can move that home into the high-cost area, for instance.

Would you pay 100K$ + for a run down mobile home? How about 150K$ for a 500 sq. ft. 1 BR condo that hasn't had maintainence done for 10 years? A well maintained condo 2Br, 900 SQ. FT. goes for 250K$.Most yuppies go for the styrofoam 400K$ McMansions...at least back when they had jobs, they did. Most of the cheap stuff for 40 miles in all directions has been snapped up by speculators.Many of the speculators are amatuers who have removed most of the equity from their primary residences to speculate in real estate.It just goes up, they tell me. Naturally these people vote for folks who pledge to prevent further development.

I simply can't find value for my dollar and so I refuse to bid...I've managed to save 50% of my income despite renting...

The homeownership rate in Cali, metro Colorado is the lowest in the nation. 50% ownership rates aren't uncommon.

They get no income-tax deduction from renting, and they build no equity while renting.

Yet another false incentive for ownership. In the long run this distorts the value of homes. Let's say we provided tax breaks for Picasso owners, would you expect Picassos to become more or less expensive? One of the primary reasons we can't have serious tax reform in this country, is the damage it would do to the housing markets.

[Southack]

"Would you pay 100K$ + for a run down mobile home?"

No. If I didn't like the state of the local housing market I'd take advantage of the mobile part of "mobile home" and buy a used one for $2,500.00 in Alabama, or I'd buy an RV or a house boat (new house boats sell for under $100k, btw). Then I'd move it to the real-estate bubble-zone where I had to live (one presumes, for a job).

You can talk all day long. You can convince yourself that you are making the smart-money play by renting, but in the end you are only harming your own finances.

Your rent is probably your largest single monthly expense, and yet that money is being entirely consumed. Rent money builds no equity. Spending money on rent is the same as burning your cash every month because it is just as gone either way. You don't get your rent money back.

That's a heck of a thing to say about your largest monthly cash expenditure, that you don't get it back.

---

You are probably wrong about the housing bubble. Real-estate prices aren't determined by how much people make, are taxed, or how far prices have increased in the past.

Real-estate prices are determined by supply and demand. If more people are moving to your area, then housing prices go up. If everyone moves out of your area, then housing prices will plummet.

If you aren't sure what people are doing and don't know how to figure out current and future demographic trends, you can always buy and live in a more mobile form of domicile rather than "risking" your money in the normal housing market.

But people don't rent to escape a housing bubble. People rent to maximize their convenience or lifestyle. Sometimes they don't want to commute. Sometimes they want a certain "prestige" of a neighborhood. Sometimes they just want to be lazy. Other times renters just don't want to part with the down payment needed to buy a house.

In some areas such as in San Francisco, not only do people rent, but they share their rental units with multiple other people, all in order to be in a trendy neighborhood close to all of the "Action". Renters in those types of areas don't even think of themselves as potential buyers. They have an image of themselves based on entirely different things (e.g. who they know, how they dress, where they work, club persona, et al). Heck, 20 or 30 years ago they might have even treid to kid each other that the reason they rented instead of owned was because of a "bubble", but housing prices have increased so steadily for so many decades that such thin rationalizations have been tossed aside from those areas.

Renting might be fun or convenient, but it's no way to succeed financially.

[AdamSelene235]

No. If I didn't like the state of the local housing market I'd take advantage of the mobile part of "mobile home" and buy a used one for $2,500.00 in Alabama, or I'd buy an RV or a house boat (new house boats sell for under $100k, btw). Then I'd move it to the real-estate bubble-zone where I had to live (one presumes, for a job).

Now, there's an idea. Always wanted a house boat...did I mention there is also a drought and the lakes are drying out..not enough water to support the growth...The 400K$ McMansions are pretty funny looking surrounded by dead grass.

Your rent is probably your largest single monthly expense, and yet that money is being entirely consumed.

No the my biggest monthly expense is the Federal Government.

They have an image of themselves based on entirely different things (e.g. who they know, how they dress, where they work, club persona, et al).

Again this is secondary...The folks who live 10 miles from the fashion victims are in the majority and in the area for the JOBS. They have also been priced out of the housing market....No first time buyers means no second time buyers...

[AdamSelene235]

Reuters Business Report

Double-Dip Recession Unlikely-Fed's Poole

NEW ORLEANS (Reuters) - St. Louis Federal Reserve Bank President William Poole said on Sunday the odds the U.S. economy might fall back into recession given the stock market's recent woes were "very, very small."'

................................... CAUSES FOR CONCERN

But he warned of some potential clouds on the horizon that could lead to instability in financial markets, zeroing in on the heavy debt load of mortgage market giants Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News).

The two so-called government-sponsored enterprises, or GSEs, had $1.3 trillion in debt outstanding at the end of last year and, according to Poole, had guaranteed another $1.8 trillion of mortgage-backed securities.

"In the case of the GSEs, the massive scale of their liabilities could create a massive problem in the credit markets," Poole said. "If the market value of GSE debt were to fall sharply ... what would happen? I do not know, and neither does anyone else," he said.

Fannie Mae and Freddie Mac, while shareholder-owned companies, were chartered by Congress to provide a deep and even flow of funds to mortgage markets, which they do by buying mortgages and repackaging them as securities for investors.

Under their charters, the firms have credit lines with the U.S. Treasury, which -- although never tapped -- many think have contributed to a view in the market that the government would stand behind their massive debts.

"I do not see any immediate risk of a GSE debt problem, but am not willing to assume that in different conditions in the future one could not occur," the St. Louis Fed chief said.

Poole said the credit lines the GSEs have with the Treasury Department should be withdrawn, adding that they could be replaced by credit lines at commercial banks.

In addition, he said the companies over a period of years should add to the amount of capital they hold. He said both Fannie Mae and Freddie Mac hold a level of capital "well below" what is required of banks.

[Looking for Diogenes]

Many European nations have a natural population growth rates (births minus deaths) of zero or less.

In Spain and Italy both have zero growth rates. Germany's is negative.

2001 World Population Data Sheet

[MinorityRepublican]

Many European nations have a natural population growth rates (births minus deaths) of zero or less.

Thanks for the link. It is especially bad in Eastern and Southern Europe. There's no doubt that for decades, the absolute number of Europeans are falling.

What will happen? Muslims will replace them.

Can you say the words, the "Islamic Union of Europe"?

[Looking for Diogenes]

What Suleiman failed to achieve by the sword will be accomplished by the condom.

It's a sad thought. The poor and uneducated reproduce quickly, while the better-off and educated folks have only one or two children, if any. The effect this will have on future economies will be enormous.

On the flip side of the condom's contribution to demographics, some years back I heard that a consequence of the AIDS epidemic in Africa would be the loss of their small professional class who had a very high infection rate. I've never seen a followup article.

[MinorityRepublican]

It's a sad thought. The poor and uneducated reproduce quickly, while the better-off and educated folks have only one or two children, if any. The effect this will have on future economies will be enormous.

I agree. However, there is a bright side to all of this. Religion.

Already in Israel, Orthodox Jews make up nearly 1/4 of the population right now. They tend to have huge families, and in the future secular Jews will be outnumbered by the Orthodox Jews.

So what will happen in America that liberals will cease to exist, while Conservatives will be reproducing at a rapid rate.

That's the theory, at least.

[Looking for Diogenes]

Ironically, the Catholic countries, like Spain and Italy, are doing no better. It seems the religious ban on contraception is not widely obeyed.

[Nuke'm Glowing]

"I do not see any immediate risk of a GSE debt problem, but am not willing to assume that in different conditions in the future one could not occur," the St. Louis Fed chief said.

Thanks Adam. I missed this article, but then again the Fed's boards have blown every call since 01 and have been late to the party. The interest rates (and if I can find a chart I'll post it) are following a scarey parallet to the Japanese interest rates. I just wonder what the overseas investors will do if we hit the .5-1.0% interest rate range and the implications for the dollar, etc. It almost seems like deflation is continuing in every part of our economy except real estate, and I still contend it's a distinct possibility to creep in that market soon.

[Concentrate]

bump.

[MinorityRepublican]

Ironically, the Catholic countries, like Spain and Italy, are doing no better. It seems the religious ban on contraception is not widely obeyed.

Even though the Catholics are not listening to the Vatican, the Pope has it right that we should not be using so much birth control.

We can see the consequences now, where has all the kids gone to?

[Southack]

$30k = Living in Mobile Style, and Other Reasons Never To Rent