To some people, that question will seem ludicrous. If you are buying or selling a house every 7 years or so, you may not care about this somewhat complex answer to the question raised. I am writing this post for real estate professionals, rather than the individual who may be buying or selling a home every 7 years or so. My hope is that if more real estate professionals understood the housing market, more consumers would be better served by those professionals.
For those that want to hear that the market is doing much worse than expected, I give you Detroit. I heard on the news yesterday that home prices in Detroit have rolled back 8.5 years. That is much worse than “expected”. For those that want to hear that the market is doing much better than expected, I have to say “jury’s still out” on that one, as the down market has not yet completed its “expected” cycle.
Yes, real estate prices always go up. But when did real estate professionals en masse start thinking that meant it looked like the chart below? It DOES NOT!
Housing Prices do not go up in a straight line!. I can honestly say that 20 years ago the only agents I met who thought this way were the salesmen vs. the professionals…and they were few. The first time I overheard an agent at an Open House talking to a first time home buyer explaining the real estate market in terms of “AWAYS GOING UP!” and drawing a chart like the one above for them, I thought “What an Idiot!”
It is only in the last couple of years that I have seen MOST of the professionals, and consequently the general public, setting the unrealistic expectations noted in the chart above. Many of those professionals have left the business, and more will follow. For the benefit of those who will continue in the industry, and for the public at large, lets get back to basics and set our expectations properly. First you set realistic expectations based on an Annual Cycle of Real Estate markets. The one below is primarily for single family residential housing. Not condos, not multi-family, not commercial – Single Family Residential Housing Market.
Annual Cycle of Home Prices
When home prices increase from year to year, most of that appreciation happens from March through July. Even when home prices decrease from year to year, prices are still expected to be up from March through July vs. January and November. THAT is the expectation.
Think of it this way, retail sales are expected to be higher in November and December than in February. They may not go up as much as expected, and that is not good. But if sales in November are lower than in February, that’s really bad. So up vs. down is NOT the barometer…it is up when expected to be up, down when expected to be down…and then it is all a matter of degree.
If you heard a store owner who only sells Christmas Ornaments complaining that his April sales were lower than his Nov/Dec sales, what would you think? That’s how I scratch my head when I hear someone saying “I’m waiting for the lowest possible prices, so I’m going to buy a house in May or June. Does not compute! I’m not saying it could never happen, I’m just saying that is not an appropriate expectation. As long as you are willing to wait until 4th Quarter of 2009 or even 2010…fine. But if you are determined to buy within 12 months, wanting the lowest price and wanting to buy in June is not a match. You will likely get a better house if you wait until May…but not a better price. Again, not impossible…just not likely. Go back and study the graph above before we move to broader market descriptions.
For this next part, different people will have different market theories. Mine are primarily based on a “7 steps forward, 3-5 steps back” theory, that I attribute to having entered my head via Alan Greenspan many years ago. Nationally the market started moving up past it’s previous peak in 1998. Consequently the expectation would be for it to go down in 2005. When it did, people freaked out while I said “DUH”.
The market performed as expected. But when professionals don’t know what to expect, they react inappropriately, which creates an unexpected market condition. It’s like playing a sport where half of your team is not performing their role “as expected”…it throws the whole game off. When your quarterback starts throwing to the guy in the wrong colored Jersey…all hell breaks loose. As a real estate agent, you are the quarterback, time to learn the plays. The people in the stands have a harder time betting on the game, when the quarterback is messing up the plays to the degree that we as professionals have been screwing up. STOP sending GOOD NEWS! C-R-A-P. This is NOT an industry based on consistent and continual “Good News”! STOP wishing ONLY for Good News, and blaming market conditions on the purveyors of “bad news”. Get Real – Real Fast…or suffer the consequence.
Another analogy. The market went down when the Dow hit 14,000. If most people said “DUH”, there wouldn’t have been panic selling. Yes the market still would have gone down, but the market loses all semblance of sanity when expectations are set at unrealistic levels. Momentum created by panic forces markets out of their natural cycle. That is true both on the up side and on the down side. The Dow was supposed to go down when it hit 14,000…in fact it should have gone down when it hit 12,000.
This is my expectation of the housing market. Yours may differ. Lacking an informed and valuable opinion from the professionals, the public will start imposing their own opinions like “markets should only increase at the same level as median income.” That is not correct BUT professionals have no one to blame but themselves for all of the Bubble Blogs. When professionals started lying both to themselves and to the public, the public had to move in a different direction. You hate Bubble Blogs, you say? Well then stop acting like you don’t have a freakin’ crystal ball! If you don’t like the public not relying on your opinion…well then go get yourself an opinion! OK, here’s mine. Beyond the Annual Cycle above for single family homes, there is the YOY expectation in a long term cycle.
Home prices up for 7 years; down for 3-5
Now let’s define what a Housing BUBBLE is. A housing bubble is when the market outperforms expectations…not when it goes UP. A housing slump is when the market underperforms expectations…not when it goes DOWN. Bubbles ALWAYS burst. That is why you need to know the degree to which the market should go up (like Christmas Ornament sales in November and December) so that you know when you are entering a bubble zone.
I learned this many years ago…so long ago I don’t know where. A market will ALWAYS reach and surpass a level it has previously achieved. It’s not a matter of IF…it’s a matter of WHEN. If it happens too quickly, the downside of the cycle will hit harder. If it happens as expected, the people betting on that expectation will do well. We want to be a Country that always does WELL…not that always goes UP beyond normal market expectations and never, ever goes down.
Once you set a realistic expectation, you can predict markets. When the market moves outside of predictable levels, you know you are in a bubble or a slump. If you think every batter is supposed to hit a home run…you will spend your life in misery and disappointment. If you expect the batter to always hit a home run…one day he will hit you instead of the ball.
Real Estate Prices are supposed to stop going down, nationally that is, somewhere between 2009 and 2011. They were supposed to go up from 1998 to 2005 and down from 2006 through 2009 – 2011. The degree they went up was “bubbled” by the loose lending practices in the latter part of the up cycle. First that bubble must pop, as it did, and now we’re looking for the end of the down cycle. If the government wants to make sure the down cycle is only 3 years and not five, then they have to do something to cause interest rates to stay at or below 5.75%, even if that is an artificial stimulus level.
No one can, nor should anyone try to, force the market to be always up. That kind of talk is for salesmen, not professionals. If you don’t want to hear ANY bad news, ever. If you don’t understand that there should be at least 3 years of “bad news” following a consistent 7 year trend of “good news”, please go do something else for a living. That’s like a lawyer who tells everyone they can win a case, cause they get paid whether the client wins or loses. That’s like a doctor ordering MRI’s every week for a hypochondriac, because he makes money whether the patient is sick or not.
Don’t want to be compared to a Used Car Salesman? Then stop acting like one.
I’ve sent a shout out to Dustin regarding some of the html code problems with the format of the above post. Happens when I insert graphs. Apologies.
You can get real graphs here:
http://mysite.verizon.net/vodkajim/housingbubble/seattle.html
That page is national, the links to various cities are at the bottom. I don’t think the data is being updated, so it ends in early 2008.
Anyway, you can see the rapid build up in places like Phoenix and Las Vegas, and how some cities in CA have gone through many cycles.
“That page is national”
That link isn’t national Kary. It’s Seattle. Can you post a link to the national one as well? Thanks.
“You can get real graphs here:”
To determine where the bubble is/was and where bottom is, you have to overlay “real” expectations against “real” actual prices. The potential “bubble” (air filled vs. value filled) would be where actual exceeded the expectation.
Think of it like a budgeted expense vs. actual expense. The expectation is not zero so $1.00 is not overspending. You have to have a hypothetical data chart to denote expectation, same as you have to have a budgeted expense to compare actual expenses against.
I purposely did not include Seattle in this post because:
1) Seattle underperformed expectations from 1998 through 2003 (unlike some other national markets)
2) Was influenced by loose lending standards (as all markets were)
3) Was dramatically influenced by local large hirings by Microsoft etc from early 2005 up to the Mortgage Meltdown, that affected some areas more than others.
It is normal for you to only want to look at what is vs. what should be or what will be. Not sure why that is, but you have made it abundantly clear over the past many month, that you have no interest in knowing what may happen in the real estate market until after it actually happens.
I would personally not hire a lawyer who could not give me an expectation of whether or not I could possibly win a case, and consequently lets me waste my money because that is how he makes money. Nor would I hire an agent who refuses to have an opinion as to the liklihood of my making money vs. losing money in the real estate market, given the conditions at time of purchase and sale, because he “doesn’t have a crystal ball”.
This post is about REAL reasonable expectations based on my accepted economic models. You don’t go to Actual, until you have bought into some reasonable expectation. You don’t need to accept mine or Greenspan’s. But you should have some expectation of how the market was supposed to perform vs. how it did perform.
Posting a link to your personal market expectation would have made more sense in light of the purpose of this post, than posting hindsight actual data. That is unless your intention was to be “off topic” as to your comment. I say this because of previous history between you and I where you make it clear you HATE it when an agent chooses to have a professional opinion beyond what actually happened yesterday.
Please, for once, I beg you, do not engage me in 250 off topic comments that try to pull me to your way of thinking IF that thinking is we, as agents, are supposed to sit around with our thumbs up our butts waiting for something to happen and then say “Who could have known?”. There are some things we couldn’t have known…but there are many, many more things that we, as the professionals in the room, should have been able to foresee to some degree.
This post is for agents who want to be reasonably sound advisors beyond “buy it if you like it and it’s worth whatever you are willing to pay for it today.”
Ardell, the difference between you and me is you think you can look at the past and have an idea what will happen in the future. I’d agree only to a limited extent (e.g. like in situations such as Las Vegas where they had a significant quick run up, you’d expect a correction). What will happen in the future is determined by future events that may have little or nothing to do with the real estate market. Past events can also play a part, such as the number of people of child bearing age trying to have children 25-35 years ago, that would affect the market today. Those events move the market, the market doesn’t cause those other events to occur.
To give an example, looking at Seattle price trends for the past 20 years one year ago wouldn’t have told you that Freddie and Fannie would be taken over and that WAMU would go under this year. That those events and others have occurred has had a great effect on Seattle prices. So to predict the prices one year from now you’d have to predict:
Unemployment
Employment
Earnings
GNP
Net population change
Interest rates
Credit availability
Housing starts
Rental rates
External news events (e.g. terrorist incidents, medical incidents)
Those and many other factors are what will drive the market a year from now. Not what the market is doing today or in past years.
Sorry, I copied the wrong thing. The link to the national is at the very bottom of the prior link.
http://mysite.verizon.net/vodkajim/housingbubble/index.html
The link to various cities is at the bottom of that link.
Ardell wrote: “I would personally not hire a lawyer who could not give me an expectation of whether or not I could possibly win a case, and consequently lets me waste my money because that is how he makes money.”
Lawyers can much more accurately predict outcomes than agents can predict future prices, but that doesn’t stop some of them from giving overly optimistic projections to generate more in fees. But more often than most people would realize the result just isn’t that clear, and sometimes a judge will decide on grounds that simply are not supportable. That means you’ll sometimes win a long shot and lose a sure thing.
What do you think of graphs like the one here?
http://calculatedrisk.blogspot.com/2008/11/real-house-prices.html
It makes it look more like a 17 year cycle than 10-12 years, if anything. Or maybe just a small S&L fueled bubble in the 80s and another much much bigger bubble in the 2000s.
Also note the linked price vs income and price vs rent graphs, which look much the same.
Kary,
Thanks for the National Link. Take a look at Sacramento and compare it to my market expectation graph above. Sacramento performed exactly as expected. Not one agent in Sacramento should have been unable to predict that market.
If I can add to the rant, I am officially tired of hearing real estate agents blame the media for frightening today’s homebuyers.
Today’s homebuyers are more cautious with good reason.
Today, more homebuyers than Realtors are willing to analyze and determine where home values are going.
Today, more Realtors than homebuyers are putting their heads in the sand and refusing to look at the reality presenting itself. (this is opposite of what happened during the bubble run-up.)
However…..I will add that this IS starting to change.
In the fall of 2007 and spring of 2008 there were still MANY Realtors who refused to believe that Seattle was in a bubble and that foreclosures would begin to rise here, after many indicators showed trends leading to rising foreclosures and lower home values. It is only now, after we can look back, that Realtors are willing to accept what’s going on here.
All the indicators Kary mentions in comment 4 are known to us. Foreclosures will continue to rise and home values will continue to fall.
It’s also easy to predict that our government will continue to try and intervene…..and that interventions will only slow our recovery. We have a few more years left to work the bad loans out of the system and a few more years (months?) left to figure out what to do with our banking system which continues to look more insolvent every day.
“…..and that interventions will only slow our recovery”
I agree, but there is value in slowing a recovery, just as there was value in propping up home prices after 9/11. Free markets can go into freefall when they move so quickly that people are startled, and panic becomes the motivating force behind financial decisions.
I believe in big government and I believe laws are to protect the least of us. “Everyone’s a Big Boy and can fend for himself” only works for those who need government the least.
I guess that makes me a Democrat after many years of being a Republican…or at the very least…a “Republican in Recovery” 🙂
Jillayne, the problem with the press is that they try to scare rather than inform. Several months ago the Seattle Times had a front page lead article about a $600,000+ condo not selling being evidence of a downturn in the market, when the condo was only bought a few months before and then listed for 109% of what was paid for it. Only in a very over-heated market you could you ever do that, absent some mistake on the first sale. Two years ago in the NWMLS stats there was one time where 2 of the 3 combination of stats (SFR, Condo, both) they could report on were up, so what did they do, highlight the one negative one. That one was down only because the percentage of condos had increased relative to SFR, so that drove the prices down. They’ve done just the reverse lately, giving more positive spins to negative numbers. In the hot markets they do more to get people out there buying than real estate agents ever could possibly do. So they contribute to both the run ups being too high, and the downturns being too low because they try to make their articles sensational rather than accurate.
Check out this story from MSNBC today:
http://www.msnbc.msn.com/id/7148582/
They make is sound as if the low interest rate mortgages are impossible to get. Do they mention the debt to equity ration needed on a refinance? No. Do they mention the credit score you need? No. Doing that would make for an accurate article. They instead what to make a sensational article. They make it sound like mortgages are unavailable.
A year ago it was first time home buyers that incorrectly thought that mortgage money had dried up. People with good credit who could always get a loan weren’t affected by the press articles then. But bubble bloggers thought that 100% financing had disappeared based on what they read in the press. Now it’s upper income people that think mortgage financing has dried up because of the poor reporting of the credit crisis–home loans are about the only functioning credit market there is–but reporting that doesn’t make for a sensational article which will scare people.
Yes there are a lot of things to worry about in the economy, but I think the press has contributed to make those things worse because people over-react based on the reporting. And at some point when things get better they’ll create a rush of buyers who will drive prices up too quickly too fast in some cities.
Jillayne, I have a message from last night caught up in the spam filters, apparently because of an MSNBC link, which is odd since I posted a PI link today without issue. Anyway, while that post is pending go to yesterday’s article on low mortgage interest rates and tell me how fair and accurate you think that story is. Tell me whether you think that article gives complete information and/or might scare some people unnecessarily.
“But bubble bloggers thought that 100% financing had disappeared based on what they read in the press.”
Kary,
Are you suggesting 100% financing has not disappeared?
Ardell, FHA actually allows 100% combined loan to value (family loan for the 3.5% down plus the closing costs–so it’s actually beyond 100%).
Ardell, re #12, no. What I’m saying is that the bubble bloggers thought it had disappeared long before it had. It didn’t disappear in August, 2007 as would be the impression people would get from reading press reports. My point was that bubble bloggers follow the market more closely than the average person, and they were mislead by the press.
Rhonda, re #13, I was referring to the conventional programs offered through Freddie and/or Fannie. Do you remember when those went away for good?
Rhonda,
I see what you are saying there, Rhonda. But the buyer still needs the downpayment. That they can receive it as a gift from family doesn’t mean they don’t need a downpayment.
“What I’m saying is that the bubble bloggers thought it had disappeared long before it had. It didn’t disappear in August, 2007…”
But couldn’t you also say that the people who didn’t buy in August 2007 were better served by those advices? They had to save 3.5% to get an FHA loan, and while they were saving, prices were going down. They were ahead of the curve because they were “seeing the handwriting on the wall”.
There is great advantage in knowing what is coming down the pike. Not being able to see past your nose rarely has as much value.
I’ll agree that Bubble Bloggers may be equally biased in wanting the prices to go down, as much as agents are biased in wanting people to buy regardless of market conditions. Equal bias from what I can see.
You can’t point fingers at those calling the negative a bit early, without also pointing fingers at those emphasizing any positive news they can unearth day in day out, regardless of market expectations. Well, you can. But you shouldn’t.
Ardell, the charitable gift scam for FHA loans, where the seller would donate funds to a charity, which would then give most of it back to the buyer for a down payment, that only went away a couple of months ago. That effectively allowed 100% financing on FHA loans.
Ardell wrote: “But couldn’t you also say that the people who didn’t buy in August 2007 were better served by those advices? They had to save 3.5% to get an FHA loan, and while they were saving, prices were going down. They were ahead of the curve because they were “seeing the handwriting on the wall
Ardell wrote: “You can’t point fingers at those calling the negative a bit early, without also pointing fingers at those emphasizing any positive news they can unearth day in day out, regardless of market expectations. Well, you can. But you shouldn’t.”
To be clear, the bubble bloggers were only brought up here because they indicated how biased the press was in late 2007, early 2008. If the press had accurately reported the availability of financing, these people would have known about it. That they didn’t isn’t their fault at all. Well maybe it’s a bit of their fault–they should have probably been reading pieces here written by Rhonda. 😉
Ardell, it’s actually two loans and can be a true zero down since FHA will allow the second mortgage (the family loan) to finance the closing costs.
Kary, I’m not aware of any 100% conventional financing programs at this time.
I’m not sure those graphs don’t just show a savings and loan scandal bump and a much, much bigger credit bubble now.
Here’s another graph, showing King Co. back to the 40s
http://seattlebubble.com/blog/2008/02/19/king-county-home-prices-1946-2007/
I wish I had a national graph going back that far, since I’m not convinced based on a graph showing only 2 up cycles, which both coincide with financial crises.
Kary, get real. The media in 2007 and early 2008 was hugely, hugely biased towards convincing people that it was a great time to buy. Every article published showing negative facts was accompanied by one with a bigger headline trying to spin the news to say prices were at the bottom and about to rebound, or that prices here would never decrease.
And Kary, yes, I am aware that financing is very easy to come by. That may be the one area where the media pictured housing bleaker than it really was. Probably because it wasn’t copying the story from NAR media releases.
Someone recently asked elsewhere if the agent commission credit can be used as the part of the downpayment. I thought not, but worth asking. Who qualifies as “family” for the family loan?
If the agent is a family member, I guess the answer would be yes, the commission can be used as part of the downpayment. Seems there could be as many people with an agent as a family member as there are people with family willing to lend them the downpayment…if not more. Can the family loan be an agent credit on the HUD 1, and not in advance of closing.
“To be clear, the bubble bloggers were only brought up here because…”
To be more clear, the reason “bubble bloggers” were brought up in my post was to point out that when agents refuse to forecast…someone has to take the ball and run with it. When agents and the associations they belong to only want the answer to be today is the best day to buy and or to sell property, someone has to counter balance that with an equally forceful opposite approach, be that the media or the bubble bloggers.
Right Time to Buy invites Not a Right Time to Buy for counter balance. Agents must be able to say to all clients at some point in time “Don’t buy now! Wait!”…but most don’t. Until they can and do, someone else has to fill that void.
You can’t have it both ways. Either forecast honestly during both up and down cylcles, or leave that job to someone else. If you feel they are less qualified than you to forecast…then you do it. If you refuse to do it…well, someone has to. You can’t have it both ways.
CB, thanks for the link to the chart. I wish it used nominal prices rather than inflation adjusted. Given the leverage of the typical real estate transaction, that would be more informative.
We’ll just have to disagree on the bias of the press in 2007. I found them wanting to highlight the negative back then. But 2007 may have been a transition year for them.
I don’t find the graph to be of any value. The homes that sold at higher median prices in 2005 didn’t exist previously. To be accurate you can’t call a new 3,000 home selling for $900,000 “a price jump” from a 1,700 square foot 1986 house selling 5 years earlier.. It’s a completely different product.
To follow appreciation and depreciation, you have to track a consistent product.
What would be very helpful would be if someone can give me dates for local events, like the major layoff at Boeing in the early 70s that influenced home prices. Microsoft opening and expansion dates. Stuff like that.
I remember on the Eastside when the market popped in 2005 it went with a “Microsoft is hiring 1,000 new employees” piece of news. Google…any change in their plans to bring in a boat load of new people?
I see Microsoft building a ton of new buildings…who is going to sit in there?
Ardell, here is an article from 2001 with some Boeing employment history at the end of it.
http://seattlepi.nwsource.com/business/39369_boeingweb.shtml
Here is a graph of the OFHEO, and Case Shiller index, which is supposed to track a consistent product. They don’t go back as far though and the only cycles I can make out (other than yearly) look like they would be related to the S&L scandal and recent credit bubble, rather than a consistent pattern.
http://calculatedrisk.blogspot.com/2008/11/real-house-prices.html
Of course you know that the Seattle Case Shiller index history and a ton of other data is available on seattlebubble.com
Detroit is an exceptional example to use. I know realtors who tried to sell a home in Detroit within the last 24 months. There were over 100 homes for sale in the same area and of course, my counterpart’s property is still available.
This is because of several factors, several dozens of factors, I’m sure you could imagine. Point being, each market is unique in some respects, there are other pertinent variables that come into play when selling, not just the expectation of the market….
Wow, I never realized it before, but according to that article Boeing started laying off in 1970, 1980, 1990, and 2001. Not the best place to be at the beginning of a new decade!
I meant 1981.
Cautious Buyer,
I like to follow other graphs, mainly to see things that the public is seeing and basing their perception on. When I track home values, I do my own stats so that I can control the sample.
Unfortunately the best samples are usually condos and not single family homes. It’s the one place I can get a large enough like kind product sample. The one I use most is way overpriced right now, so I have to find a new pool of product for stat purposes.
I don’t go back before 70 for the most part as I can’t be intuitive as to the data I’m seeing when it is before my life experience. I also prefer to track “my service area” rather than King County as a whole. 8% in Kenmore vs. 26% in Redmond is a huge difference! I don’t like to average the two.
Rhonda, I was asking when did 100% conventional disappear. I’m thinking very early 2008. I really need to write that down someplace.
CB, Boeing used to have a lot more effect on the local economy. I think it was the late 60s when they had the billboards saying something like: “Will the last person in Seattle please turn out the lights.”
Kary,
It doesn’t matter when conventional 100% disappeared. It affected price of homes when that happened. Those that predicted it early on and those that acted upon that info in advance of it happening, had great benefit of forsight.
From an agent benefit standpoint, you might say “hey, I could have sold 5 more houses before it happened! Bad Bubble Blog! Misinformation!”
But from a Buyer Client benefit standpoint you might say, “Thank you Bubble Blog! Glad my client didn’t buy in the interim gray period right before it actually happened, as if they had, they would have overpaid. Thanks for the heads up!”
Again the point is from reading the press reports you’d have thought 100% disappeared long before it did. We both agree that 100% going away affected prices, because it reduced the number of buyers. What I’m saying is the number of buyers was reduced earlier because people thought 100% went away before it did.
It’s very similar to the MSNBC article I linked above. Fewer people will attempt to refinance taking advantage of lower interest rates because the article makes it sound like it’s difficult to refinance. If they gave the applicable numbers (debt to equity, credit score, etc.) it would be a better, more accurate article. As it is, it’s just designed to be sensational.
“What I’m saying is the number of buyers was reduced earlier because people thought 100% went away before it did.”
I agree. But why is that bad? Isn’t it better to be forewarned?
Passing out inaccurate information isn’t forewarning. But for the credit crisis of this year our market could possibly have been recovering at this point. But for the inaccurate information on 100% financing back then, our market could have been doing better than what it was prior to this year’s credit crisis.
Forewarning would be something like what you did several months ago–pointing out the overhand of lower priced pending transactions. I challenge you to find that warning in any press report.
“Forewarning would be something like what you did several months ago–pointing out the overhand of lower priced pending transactions. I challenge you to find that warning in any press report.”
Again, I agree. But why would you expect “any press report” to know more about my business than I do?
Okay, perhaps that would be expecting a lot. 😉
Still, going back to the MSNBC article, do you think it would be that hard for them to report debt to equity and credit score information? Do you think it very likely that none of the people they talked to mentioned such things? Almost certainly they had that information. But they aim for sensational rather than informative.
I thought the MSNBC Article was spot on.
“Lower rates won’t mean much for the more than 4 million homeowners who are already behind on their mortgage payments, or the 12 million homeowners who owe more money to the bank than their homes are now worth.”
If the house wouldn’t appraise or the owner is behind in their payments (assume low credit score there), low rates won’t help them. The article is correct in that regard. Why do you think this is bad reporting?
They then pointed out the plus side for new borrowers who qualify, but that was not the main point of that article.
The point of that article was aimed at those in most need of lower rates. It points out that lower rates doesn’t necessarily give them a refinance option. I think it’s an excellent article. It appears you wanted it to come from the other side. “Great rates for those who qualify…unfortunately won’t help those in most need of lower rates”.
Seems you want the article to come from the plus side vs. the minus side. The Country is on the minus side in many, many ways. Target is running ads on affordable and responsible Christmas shopping. Should they be running ads on their most expensive items at this time of financial crisis?
Coming from the side of financial crisis IS appropriate at this time for most reporters, and for most marketing efforts.
I’m humming “Keep your sunny side up” 🙂 It’s not the job of the press to assist in that regard.
I’m pretty sure “keep your sunny side up; hide the side that is blue” was written in 1929. Perhaps you want “Happy Days are Here Again” because rates are down. Sorry, Happy days are NOT here again. Sorry to break the news.
The headline is: “Mortgage rates fall, if you can get a loan
Average is now 5.76 percent, but brokers say securing refinancing difficult.”
Note it doesn’t say “may be difficult.” It says it is difficult. And the headline is all a lot of people ever read.
The article also says: “But some of those callers were confronted with an unwelcome truth: only those with good credit histories and equity in their properties need apply.” Great, but where’s the follow up with that information?
The article jumps back and forth repeatedly between normal people and people behind on their mortgage payments who may need a workout. Guess what? The latter group can’t refinance. Even prior to the August 2007 mortgage crisis, many people who were in that situation could have been looking at a 14% variable rate. Low rates are simply not applicable to people in serious default.
So let’s recap. The article lets those in default know the obvious–that they can’t refinance at a low rate, if at all. And for the rest it doesn’t give the information they need to make the article useful, and has a headline that would discourage them. I’d call that poor reporting.
Ardell wrote: “Seems you want the article to come from the plus side vs. the minus side.”
No, I don’t want it to be either positive or negative. I want it to be accurate and informative. I’d give the article a “D.”
Pingback: Is the housing market performing “as expected
I once learned from a wise real estate journalist, Lew Sichelman, that it’s not a good article if no one reads it. In other words, the headline and article have to garner a broader interest beyond those for whom it may apply. They did what they do, well. What they do has nothing to do with the mortgate industry or the lending industry. If you want those kinds of articles, read Inman News or Realty Times, not MSNBC.
It is part of our job as agents to read all of the general articles, so that we know what people’s perceptions might be when we meet them. It is our job to change those perceptions into their personal realities. It is not MSNBCs job to make our job easier. It is their job to write articles of popular interest.
I get a lot of emails and calls from people in distress from all over the Country. Trust me on this one. It may be obvious to you and me when someone in distress can’t refinance, but it is not obvious to them. I have had many people thinking that they can refinance at the new, lower rates, that are 2 months behind in their payments. They think that is the answer to their problem. That article speaks to them. You may think they should already know that…but they don’t.
Low mortgage rates are a very BAD sign for real-estate. Rates are low because investors are running to government-backed assets as quickly as they can, selling everything else as fast as they can.
I published a podcast about this at http://msurkan.podbean.com.
Ardell wrote: “Yes, real estate prices always go up.”
Actually, I would have to disagree with this. The really long-range historical studies of real-estate prices (e.g. some neighbourhoods of Amsterdam) seem to indicate that prices pretty much just follow inflation over the long-haul, but with multi decadal periods of massive appreciation followed by similarly lengthy periods of depreciation.
People who think that it is just a matter of “holding out” long enough to see prices reach their previous peak after the biggest appreciation periods might find that the long-haul could be VERY long indeed (e.g. taking 30 to 50 years).
Thank you for your comments, Sniglet. I think of you often and your question regarding whether I would rethink by position on home prices. How far back, in years, would you want me to go? 2001? 1982? I can’t get it out of my head. If you said 1950, it would really help me 🙂
Regarding your #45, you are talking like someone who may someday buy a house as opposed to someone who owns one.
If you buy a house today and can afford it today, your income doesn’t have to keep up with price. Your payment is locked in for 30 years. Your price will go up, and you won’t need to “adjust for inflation”. That is why as an agent I never adjust for inflation.
Client bought house for $200,000 when his income was X. 10 years later his house is worth $400,000 and his payment is the same. He made $200,000 less costs of purchase and sale. Inflation has nothing to do with it.
Ardell wrote: “How far back, in years, would you want me to go?”
I don’t think in terms of years, I think about prices. As I’ve said before, I believe we will see a greater than 80% drop in peak median Seattle area prices when we hit bottom. Thus, a home that sold for $1,000,000 in 2007 will wind up selling for no more than $200,000 (and likely less). What that would work out to for a rewind in years is beyond me.
Ardell wrote: “Your price will go up, and you won’t need to “adjust for inflation
Ardell wrote: “It is part of our job as agents to read all of the general articles, so that we know what people’s perceptions might be when we meet them. It is our job to change those perceptions into their personal realities. It is not MSNBCs job to make our job easier. It is their job to write articles of popular interest.”
I know true journalism is a bit old fashioned, but I find those comments a bit shocking. Agents should not have to alter the incorrect perceptions people have about the state of the housing market, mortgage market or any other market. For one thing, agents might not even come in contact with the right people (although that’s more true on the downside than the upside).
Some news sources over-hyping the bad and over-hyping the good is not a good thing even if there are better sources out there.
If a house goes up with inflation, even lagging a bit, most owners will benefit due to the leverage. At 7% inflation a house would double in value in about 10 years assuming the house value kept up with inflation. That would mean $200,000 worth of equity on a $200,000 house. But on top of that, you’d be paying any remaining debt back with dollars that were worth half as much. Assuming full leverage and an interest only loan, that would effectively be another $100,000 of benefit for the owner at the end of ten years, assuming they paid off the loan at that time and kept the house.
Of course there is the threat of deflation. And there could also be other things that might adversely affect house values relative to other assets–like say a pandemic influenza.
As I mentioned earlier, any time you buy an asset there is a risk, no matter what that asset is. Even holding cash is risky, due to the inflation risk. The only way you can avoid those risks is to not have any assets at all, which is hardly a good alternative.
BTW, this graph someone cited to earlier shows King County inflation adjusted values. It shows King County medians going down from 1980 to 1987.
http://seattlebubble.com/blog/2008/02/19/king-county-home-prices-1946-2007/
From memory, that might have been the case with condos (or worse), but I think the nominal values were relatively flat or slightly up. Does anyone have those numbers for 80-87? If it’s what I think it is, that would show the benefit of inflation to leveraged homeowners.
Sniglet,
Will median income also go down by 80%? Do we then adjust for deflation and say prices stayed the same?
Sniglet,
Home prices in this Country HAVE always gone up over the years. How is it “presumptuous” to state the truth? What happened to hindsight has 20/20 vision? Why does everyone want us to look at Japan? Are the Japanese planning to take over America?
I agree that people should not buy a house assuming it will increase in value. They should buy one planning to pay it off and have no housing payment by the time they retire. But I don’t see that happening, do you?
Could prices go to twenty cents on the dollar? I think if Microsoft folded they could.
Ardell wrote: “Could prices go to twenty cents on the dollar? I think if Microsoft folded they could.”
No, I don’t think anything so dramatic would be required to see housing prices drop significantly. To use the Japanese example again (as much as people seem to hate it), Sony and Toyota didn’t have to go bust in order property prices to crash. Neither are Japanese salaries significantly lower today than they were in 1989 (higher, in fact).
Even closer to home, house prices are crashing in California (down some 30% in just one year), and yet hardly any of the major California businesses were shutting down or laying people off (although recently firms like Google and Sun have announced lay-offs).
All it would take for real-estate prices to tank here is for salaries to remain stagnant and for all the major employers to cease hiring. Lay-offs by major Seattle area employers would exacerbate things considerably.
House prices are not crashing where I lived in California. They’ve barely budged. California’s a big place.
“If a house goes up with inflation, even lagging a bit, most owners will benefit due to the leverage.”
Kary, while this is true when prices are outpacing inflation, it is not true when prices lag inflation. This is, in fact, one of a long list of “can’t lose” selling points that have made bubble bloggers skeptical of Realtors.
Why not tell it like this: buying a property is a business decision based upon a net benefit to the owner in the form of imputed rent. If the rents, through tenancy or imputed, do not offer a decent return why should one buy?
OK Everyone, let’s get back to reality.
You buy a home to live in it. You hope if you stay there long enough you will pay it off so you have a home when you are too old to work. Some people pay it down by the time the kids go to college and then borrow against the equity for college tuition.
You don’t buy a house because it will go up in value. You buy it so that after many years of making payments, you own it. The added benefit is it is worth more if you do that.
My parents first home cost $7,000. My first home cost $45,000.
If it is an investment vs. a home then investment equals risk. The higher the potential return, the greater the risk. No investment is a sure thing and all investments require timing.
People who buy ocean front property or unique property usually keep it in the family for generations. They don’t flip it in two years.
Ardell,
A lot fewer houses would get sold if people only bought when they were sure they would never move for the rest of their lives. They would also sell for a lot less, and they would only sell to people middle aged and older.
Kary,
Leverage works both ways. If prices depreciate, you could lose many times more than you originally put in.
The Japan example is important because it makes us aware that it is possible for prices to decrease for decades. That means possibly no borrowing against the house for college tuition. That is, unless you bought close to 30 years before the kids went to college. How many people buy the last house they will ever live in 30 years before the kids go to college?
Question for Ardell and Kary. How old were you when you bought the house you live in right now?
I’m in an odd mood…stopped to see my sister this afternoon and bring her an extra turkey I made for her. Found out she has both breast cancer and diabetes. Diagnosed last week. She didn’t want to ruin my Thanksgiving. I’m going to take a break from commenting.
Sorry guys. Hoping Kary will pick this one up for me.
I think Ardell was selling(sold?) her house.
Enjoying this discussion. This has been a hell of a year.
Jesse wrote: “Kary, while this is true when prices are outpacing inflation, it is not true when prices lag inflation. This is, in fact, one of a long list of “can’t lose
Jesse wrote: “Why not tell it like this: buying a property is a business decision based upon a net benefit to the owner in the form of imputed rent. If the rents, through tenancy or imputed, do not offer a decent return why should one buy?”
I stated it differently here just yesterday. I stated that buying any asset has risk, and that even cash is an asset. The only way to avoid risk is to not have any assets.
As to your analysis, it is an incomplete analysis. Investors in apartment complex don’t expect to make a return just off the rent. Often they even face a negative cash flows. Ardell’s post at 59 gets to that as to homeowners.
CB, re 60, you’re right–leverage does work in the inverse–badly when things go down. Just like buying stocks on margin. The difference is houses don’t have margin calls.
As I’ve mentioned in the past we just bought last year, so I was 49 when I bought it. I’m not sure what your question gets at, but I’m a long term buyer. In my adult life I’ve only lived three places (excluding temporary housing during a remodel), and one of those moves was to move in with my wife. I hate moving. I’m a real estate agent’s worst nightmare because I only move every 10 years at best, and when I do move I look at over 80 places before deciding on one! 😉
Edit: Ardell–take all the time you need.
RE 63
“Investors in an apartment complex don’t expect to make a return of just the rent”
It sounds like you are talking about speculators. They are counting on being able to sell to someone else for more later, therefore they will take the negative cash flows. I’m just not sure it’s sustainable to pay more for homes than people would pay to live there, expecting someone to pay an even bigger premium later.
As a hedge against inflation, expecting increasing rents, maybe, but you could just buy any commodity for that. It would make more sense to me to put it in several different investments that move with inflation, just in case prices and rents don’t go up.
I want to expand on Ardell’s post 59. Way too much emphasis is put on whether houses go up or down. Unless you’re buying a rental unit, that shouldn’t be your primary reason for buying. If it is you might want to reassess, because there are a lot of other investments that are more liquid and have much lower transactions costs.
The benefit to owning your own home is the ability to control that piece of property. There are threads elsewhere of people renting from landlords in foreclosure. Those people are totally out of control of their own lives. Or perhaps a landlord would want to sell. Again, the tenant is totally out of control. That means their family situation is totally out of control. The son’s bedroom is no longer the son’s bedroom. It’s just a room.
It also means a more transitional lifestyle. The street I live on has no rental houses. Kids have grown up here, and others are growing up here. They know each other and their parents know each other. This summer I met a young woman who grew up in my house. She came back to the neighborhood because she was invited for a neighborhood event. She knew everyone here except our family.
Sure you can buy a house only hoping it will go up in value. And you can even periodically suck money out of the thing while it does go up in value. I don’t think that is what home ownership is primarily about. Home ownership should be primarily about control, stability and as Adrell mentioned, eventually having something you own. On that last point, I think this country has really gotten away from that.
20 plus years ago I was on a bus listening to an old woman talking about people. She said that back in her day people would save until they could afford a chest-of-drawers, where now they just put it on credit. I think a similar thing has occurred with housing.
When you look at estate sale listings today often the owner has owned the house for so long agent tools don’t indicate how long they’ve owned the house. If they owe anything at all against the house, it’s under $50,000. In contrast, most people today move frequently, and many of them increase the amount they owe on their homes, rather than working the balance down. The goals they are working toward are totally different, and I’m not sure they’re good goals.
CB wrote: “It sounds like you are talking about speculators. They are counting on being able to sell to someone else for more later, therefore they will take the negative cash flows. I’m just not sure it’s sustainable to pay more for homes than people would pay to live there, expecting someone to pay an even bigger premium later.”
No, I’m talking just about anyone who bought an apartment complex in the past 10-20 years.
With the multiples commercial real estate has been going for, it wouldn’t make any sense to put 50% down. You’d do better putting money in a savings account. Part of that is due to the availability of the depreciation expense, and other tax benefits, but a good part of it is simply because they expect to make most of their money when they sell. And for that to earn a decent return, they have to be heavily leveraged.
BTW, there’s been some news lately of an impending meltdown in commercial real estate. I’d consider that a significant problem because unlike residential, there’s no Freddie, no Fannie and no FHA. Until liquidity returns to the lending markets, I would expect to see a lot of “refinances” done through Chapter 11.
CB wrote: “It would make more sense to me to put it in several different investments that move with inflation, just in case prices and rents don’t go up.”
I’d agree with that. Continuing with my own house purchase saga, I was getting advice from others to rent our old house out, because “it will only go up in value.” Well ignoring the fact that I didn’t believe that, I didn’t want to have so much tied up in one type of investment. Diversification is good. Fortunately I didn’t diversify into stocks! 😉
Ardell, sorry to hear about it.
Kary. There are events for homeowners pretty similar to margin calls. Work transfers, layoffs, divorces, illnesses. Even marriages and pregnancies would be like margin calls if the home didn’t fit the new living arrangement, like in your case moving in with your wife.
If the house appreciates more than 10% for transaction costs, none of that is a problem. You can always sell and move to wherever is suitable for your current situation. If the house doesn’t appreciate, you could have a big problem. That is why it matters whether prices go up or down after you buy.
Of course if the house is not a speculative bet, and you are paying close to than what someone would pay just to live there (rent), you can always rent it out. But that is not the case with today’s prices in King County.
My point with the age when you bought your last place is that this plan of buying with a 30 year mortgage expecting never to move doesn’t necessarily fit with real life. Neither of you went out when you were younger, bought your first house, and lived there for the rest of your life. Not many people do.
CB, true you can have a reason to move that you didn’t anticipate, but a margin call on stocks is based on the price of the stock, forcing you to sometimes sell low. Even buying stocks off margin you could be forced to sell based on other events in your life. The benefit of stocks in that regard is they’re typically liquid and low transaction costs.
CB wrote: “My point with the age when you bought your last place is that this plan of buying with a 30 year mortgage expecting never to move doesn’t necessarily fit with real life.”
Maybe I should have bought a rambler so I wouldn’t have to climb stairs at the age of 80! 😀
“Maybe I should have bought a rambler so I wouldn’t have to climb stairs at the age of 80!”
Don’t laugh! I’ve got some older relatives who built their 3 story 5 bedroom dream home when they retired and ended up moving into a condo 3 years later because they didn’t want to climb stairs and vacuum 3500 square feet. They were much closer to 80 than you are though, and a little short sighted.
Stairs were actually something we thought about when buying, in part because it’s something often mentioned by buyers. I was a bit reluctant to not go the rambler route, but I can tell it’s actually strengthened my knees. Also I look at my dad compared to my mother-in-law. He’s been dealing with stairs and can get around a lot better than the MIL who has lived on one story for maybe 20+ years, if not much longer.
It’s true of any profession: if you want the best, you will choose a seasoned, experienced professional. Years of experience matter.
Yes, we were all new once, but when you are choosing what is likely the single largest purchase in your lifetime, choose your agent wisely. Get recommendations, and interview. If you go with your cousin or sister who just got their license … make certain they have a good mentor who will assist in every step you make.
#12, Ardell, I just closed a 100% financing transaction for a VA buyer. Our VA buyers well earned their 100% financing.
# 40, happy days are here again. I think the revival of ‘going back to the basics’ does mean happy days are here again :-).
In the mid-80’s, we advised our clients to expect a typical apreciation rate of 3% per year. 3%! That was historically accurate. Maybe we’ll see lower or higher in the next ten years, I don’t know. But anyone who expects 10% per year or more, on a constant basis, is insane.
Just in case that is not a big “duh” for everyone, yes, VA is 100% financing. Has always been as far as I know. But that’s not what we’re really talking about here as VA had no impact regarding change in lending practices in August of 2007.
Leanne,
Tell me something bad and I’ll tell you something good 🙂 What is #74 in response to?
Ardell, first let me say I am sorry to hear about your sisters health. Hang in there.
My response # 74 was a response to this paragraph you wrote “I am writing this post for real estate professionals, rather than the individual who may be buying or selling a home every 7 years or so. My hope is that if more real estate professionals understood the housing market, more consumers would be better served by those professionals.”
I perhaps should have said that the agents who have been successful agents for many years are likely the most knowlegeable. I’ve never gotten over the early 1980’s and seeing the damage done to so many homeowners who went thru foreclosures and bankruptcies – so over the years, I have always been very conservative with my advice to clients.
Re 77, yes we did get a bit off track on the 100% issue. It’s my mistake because when I brought it up I didn’t expressly say conventional, which is what I was referring to.
I finally had a chance to listen to the poscast in #44, which apparently is Sniglet talking?
People really have to stop talking about interest rates being relatively low “compared to double digit rates in the early 80s”. No one compares rates to that time. Every one reacts poorly when they are 6%+ and better when they are 5%-something. That’s all you have to know about interest rates. Are they 5%-something or 6% and over. Live in the moment…stop going back to the 80s…no one cares.
The market riding the under and over 6% point in the last 18 months has had a significant impact on the housing market. I fully expect rates to be closer to 5% than 6% if the government is serious about improving the housing market nationally, and I think they are. I expect the avg. mortgage interest rate for 2009 to be 5.5% – 5.75%.
Cautious Buyer’s Comment”
What do you think of graphs like the one here?
http://calculatedrisk.blogspot.com/2008/11/real-house-prices.html
It makes it look more like a 17 year cycle than 10-12 years, if anything. Or maybe just a small S&L fueled bubble in the 80s and another much much bigger bubble in the 2000s.
Also note the linked price vs income and price vs rent graphs, which look much the same.
(I couldn’t fish it out of the spam bin as it didn’t Pass through “in moderation”. I saw it in my email and am “re-posting” it.)
In the past I’ve said inflation is good for the government, because it would take some of the pressure off the banks. Their marginal security would rise with the tide and no longer be marginal.
The same could be said for low interest rates. Churn is good for the banks and government. They want refinancing activity because each refinance removes toxic assets from the banking institutions (and also makes it clearer how much of the remaining is junk). Low interest rates will get people to refinance.
One other thought in case I haven’t said it here–the low interest rates are probably a lot related to Paulson terrifying everyone over the past two months or so. The lack of buyers caused by his statements and erratic activity reduces the demand for loans, which should reduce the interest rates.
Cautious Buyer,
Excellent point. Yes there are years in between down and up that are flat. Basically, nationally, it was 16 years from peak to peak from 1989 to 2005. The down years were 90 to 93 or so, then flat to 95/96, then starting up, then increases from 98 to 2005.
7 + 3-5 is up market down market. If the market stays flat in between the two, that extends the cycle. I don’t have any forecasting for the flat periods. Sometimes it will swing up quickly, other times not.
In the Seattle Area the Tech Industry hiring blows everything out of whack. If Microsoft goes from hiring freeze to layoffs, we will see the market decline. If they go from feeze to hiring, then the opposite result. I’ve been hearing about Google supposedly bringing in a lot more people, but I haven’t seen evidence of it. They keep their news a lot quieter than Microsoft does.
Ardell wrote: “I’ve been hearing about Google supposedly bringing in a lot more people, but I haven’t seen evidence of it. They keep their news a lot quieter than Microsoft does.”
If only there were some way to search for such news. 😉 😀
http://www.google.com/news?q=google+hiring+seattle&sourceid=navclient-ff&ie=UTF-8&rlz=1B3GGGL_enUS269US269
” Investors in apartment complex don’t expect to make a return just off the rent. Often they even face a negative cash flows.”
Call it what it is: speculation. For apartments and condos that cannot be utilized much more efficiently, all you have are the cash flows and a future owner will have the same cash flows as well. The only way to make above inflation capital gains in this case is to find someone who will be willing to accept even lower yields than you.
I would not look at the past 20 years as an indication of what to expect for capital appreciation. There was massive disinflation that led to perpetually decreasing mortgage rates. We are now at the end of that train ride. Any expectation of capital gains beyond inflation is a pipe dream and for high density housing rents will not increase with wage gains since the building ages and becomes less desirable, i.e. lower rents.
I don’t want to get into a long debate here. My point is that your arguments are not the absolute truth and not rationally and openly considering the counter arguments and acknowledging there has been much truth in them makes your arguments ring hollow, especially since you have a vested interest in higher prices.
You seem to be using speculation vs. investment more as what you like or don’t like. Personally I don’t see much of a distinction.
I have no vested interest (or any interest at all) in higher commercial real estate prices. I’d agree that commercial residential probably won’t be going up a lot, but for an entirely different reason: The condo conversion market pushed prices higher in the recent past, and now that is unwinding (and also leading to a greater supply of apartment complexes as buildings built as condos convert to apartments).
BTW, you don’t need appreciation in excess of inflation for leverage to work. The appreciation could trail inflation significantly and you’d still be okay.
Kary,
I saw the news…I asked for “evidence of it” actually happening.
Ardell, I was just joking, but if you were looking for evidence a better response would have been: “Objection–hearsay!” 😉
Hi Ardell – better late than never. 😉 Frankly I don’t think the pure salesmen will be able to convert to professionals. There has been such a pervasive fear to be honest with customers that it hurts everyone. NAR with Yun & co have done significant harm to the agent image. The industry is missing a giant opportunity to be trusted advisors.
And I agree totally with the bubble blogger reasoning you laid out. The fodder for them has been endless and I am sure they appreciate it.
One other note beyond expectation setting…I have observed that typical agents are far more nervous now than buyers are about the current market. Are you seeing that and if so, why do you think that is?
“I have observed that typical agents are far more nervous now than buyers are about the current market. Are you seeing that and if so, why do you think that is?”
Jonathan,
It’s a good sign when agents are more nervous than their clients…it shows that they take the full weight of responsibility for their advices. Any well informed person would be nervous about the current market. I’ve been making my clients more nervous about the market for quite some time now 🙂
It’s funny. When they ask if the value will be up if they decide to move in 2-3 years, they really want you to say yes, even if it’s a lie. That’s why I don’t think you give your customers what the want. Anyone buying in this market should be doing so with the understanding that gains, if any, could be in the very far distant future.
Buyers aren’t nervous once they decide to buy, because they understand they are buying something they want. It’s like buying a piece of art because you enjoy it vs. being assured that it will go up in value as part of your estate.
There are fewer buyers but those that are buying are doing so with confidence. Either because they are sure that they are getting a hell of a deal, or because they really want it that much.
Thank you for stopping by. There are very few opinions I value…yours is one of the few. It did win The Carnival, but winning your approval was of more value to me.
Thanks Ardell (blush) I always gain new perspectives when we speak…after all, you are the real estate maven). Hopefully you are venturing out east to Inman in Jan?
No Inman in Jan for me. Have fun! Tell Noah and the Sellsius guys I said Hi.
The buyers by definition would be less nervous, because they’re in the market. It’s the non-buyers that are the problem. Most people have little confidence in the economy.
Quite frankly, I don’t blame the non-buyers. I went off on Treasury Secretary Paulson over in P-I land recently. He’s worse than Chicken Little. It’s not his yelling the sky is falling I have a problem with, it’s his subsequent running around like a chicken with his head cut off I have a problem with. It just doesn’t result in confidence–it destroys confidence.
In my piece I blamed him for the grim November sales figures. I was looking for a place to buy during the August, 2007 mess. I don’t know that I would have been during the October, 2008 mess. I probably wouldn’t have been.
Thankfully Paulson’s reign of terror is about to come to an end, and none too soon.
Kary,
Isn’t it only “a Chicken Little” if the sky ISN’T falling?
Fair point. Also, not entirely Chicken Little when he refuses to publicly say what he sees as the potential downside because he thinks that scenario is so dire. Chicken Little didn’t run around yelling: “Something bad is happening, but it’s so bad I’m not going to tell you what will happen!”
But that’s not all that I have a problem with. It’s his erratic behavior since that I mainly have a problem with.
I keep thinking how lucky Obama is going to be a few years from now, if he can take the credit for things getting better. He certainly won’t get the blame if things get worse. Paulson and Bernanke just have to go. There’s no way they can bail themselves out of this hole.
Bernanke will be in place possibly through Obama’s first entire term, or at least most of it (unless I’m forgetting how long he’s been in place). He’s not a cabinet official.
I blame Bernanke for pretty much everything. His penchant for reversing Greenspan also reversed the Country. He didn’t want to put his finger in the dike when Greenspan removed his finger. He wanted the chips to fall where they may…now we’re knee deep in chips. Not neck deep…but knee deep for sure.
I think what Bernanke was doing was trying to avoid the mistakes of Ford/Carter where the Fed clamped down on (what I consider non-existent) inflation, pushing the economy deeper into recession. What Bernanke didn’t foresee was the credit crisis. It’s rather ironic because in both situations we probably would have been better off with more inflation.