Housing Crisis

Posted in Economics on April 5th, 2005 by Дмитрий

I have a lot of regrets that I did not take advantage of low housing prices in Fresno a few years back, when I really could have afforded a nice two-bedroom Tudor in the up-and-coming neighborhood…

But I’m really glad I’m not falling for the huge white elephant which is today’s housing market bubble. And I’m not the only one who think’s it’s so.

I don’t plan on buying a home in this market. Unless I were to get a Certified Rust Belt home, in a town unlikely to have experienced much housing inflation recently. Which sucks because my biological clock has reached its “need garage and garden” point.

Some advice, kiddies - I do not profess to be an economics or finance expert (well, maybe a little), but I think I’m well-read and smart enough to know my stuff here - take it or leave it:

  • Most of America’s recent economic growth is due to asset price inflation and attributable to the finacial services sector
  • Sustainable growth can only be achived through stable prices and productivity growth
  • Most Americans are not making more money or being any more productive than they were 5 years ago - they’re just spending money from refinanced assets
  • The rate of first-time homebuyer growth is vastly outpaced by the rate of second-time homebuyer growth. This means that in addition to buying plasma TVs with their refinanced houses, people are buying second houses with the cash from their refinanced first ones
  • If interest rates go too high to justify the increasing asset financing we see today, people will stop buying second homes, and if this is accompanied by an economic slowdown or wage stagnation, people with excess property will start dumping assets
  • If it comes to asset dumping, there’s going to be a huge glut of excess real estate flooding the market, right at the time when fewer people can afford it
  • People will start selling upside-down real estate which has more owed on it than it’s value, and this will spiral down, down, down ending with a veryhard economic landing for every idiot that is fueling our economy with borrowed money and not saving a cent
  • I will chuckle as the crash commences, and relish my unusually large (for an American) savings, which I will be earning better returns on than real estate due to an imploding housing market and higher interest rates
  • I will chuckle harder as the bottom completely drops out, allowing me to use my savings to make a nice fat down payment on a property which was half again as expensive the year before…

Anyone want to bet an issue of Frugal Living whether I’m proven right within the next 5 years? Anyone have an argument which logically counters mine?

Where Goeth April

Posted in Charlotte, Site News on April 25th, 2005 by Дмитрий

What is it about April that makes me unable to update?

At least this year I have the excuse of the pending relocation. Picture a 1000 sqft, 2-bed, 2-bath apartment with washer, dryer, dishwasher, disposal and two big roman tubs. Now picture us paying about 60% the rent we pay now for a 500 sqft 2-bed 1-bath apartment with none of those 4 other things. Now picture us wondering again what the advantages were of the place we left…