You can take anything to extremes. The key is for the dollar to find it’s ACTUAL market value…not the high artificially priced dollar or todays de-valued dollar. Eventually it WILL find an equilibrium with the market and things will stabilize. Until that happens it will be a bumpy ride. I’m not denying that. It just won’t be the gloom and doom that some folks are making it out to be (same kinds of gloom and doomers that came out of the wood work when the dot com bubble burst). And I don’t think that what the Fed is doing is politically motivated based on the current presidential election cycle.
The problem isn’t that we’re trying to sell the house right now, it’s the uneasy feeling of being completely insecure in your finances. If something happens and I become disabled, or one of us dies, or we have to move for any reason, we’re utterly fucked financially for the rest of our lives.
Housing busts go on far longer than “anyone” thinks is proper. What you say above is technically correct, however it is going to take years before prices drop to your fire sale price of $200k.
It’s really simple. Transactions have dried up. That means whatever price is out there in the market is meaningless. Prices have to drop until there is a clearing level of buyers matched with sellers and a “reasonable” level of transactions. IIRC, Jan was the lowest level of recorded transactions in decades.
XT, with all due respect, you have no clue about the Tokyo real estate bust. It was bad, it was hard, and frankly speaking probably only a decade after it started did it start to reach clearing levels.
Word. The US is going to have a very rude lesson in what the result of a “competitive” devaluation means. First off, there is a direct correlation between a falling dollar and rising oil costs. Second, exporters to the US get much more competitive (look at the lessons of Japan in the mid 1990’s). Third, histroically there has not been a leading global economy with a sustained devaluating currency.
Americans love the magic wand no pain fix. Great, let’s devalue the currency and that will solve all of our economic woes. In reality, the US needs to save more, spend that savings on productive economic assets, and quit buying so much consumer crap.
An additional rate cut is kinda like using gas money to buy that last 6 pack in hopes that the 2 week bender won’t crash down for a few more desperate hours.
Generally speaking, I side with spoke and China Guy. I’ve read two very convincing articles in the last month (one in the Atlantic and one in Business Week) arguing that the housing bust has only just begun. Housing prices will have to drop 25-30% more before they’re in line with historical trends. Thus there’s a lot more pain to be endured by the typical American family, and that will eventually hurt consumer spending as well. To make matters worse, credit cards companies are tightening their standards so families can’t get cash as easily.
As for the idea that the dollar has bottomed out, that’s wishful thinking. Foreign governments still have tons of dollar reserves that they could slowly unload, which would drive the dollar even lower.
Well…perhaps. I flatter myself that I have at least a small clue about the situation in Japan during that time…but perhaps you are right. One thing I do know is that the Tokyo Real Estate bubble was a hell of a lot bigger than the US’s bubble…and it was more concentrated.
At one point I seem to recall that Tokyo was valued at something approaching the entire US (millions of dollars per square yard)…that’s how over inflated their market was. I remember someone saying that the ground under the Imperial Palace in Tokyo was worth more than either California or Texas (or maybe California AND Texas…I mis-remember).
Even in that hugely over inflated environment however Tokyo didn’t become a ghost town. Properties didn’t sit around for that entire decade…investors (those left) still bought property as the prices fell.
The US is in no where near as bad a shape as Japan was after it’s bubble…because their bubble was a mountain sized bubble and it’s effects were concentrated among the people who had the most capital. The US bubble is markedly different in a lot of respects.
Simplistically speaking, this is the problem. Americans don’t have cash and then use credit cards for cash management. Nope, Americans (painting with a broad brush) think credit cards are cash.
Just like you should have a McMansion because that’s the American way versus living lean for years, saving 20% down payment, living in a place where you can afford the payments for the life of the loan (no 2 year resets).
For Americans that do have cash, the devaluing of the USD is painful. I know I am sending my income overseas every month as I can’t keep it in Euros in a US bank. I am still baffled as to why one can’t open foreign currency accounts at US banks - Only Everbank seems to do this.
I have made close to 50% in 3 years by not being in USD.
That sucks. Though I guess it was good when our currency was being kept at an artificially high level for the last few years. I suppose there is no way to change it over to another currency?? The dollar is likely to drop even further before it levels off and eventually starts to recover (somewhat).
But why did the dollar need to be adjusted? It seems that the EUR and GBP have already been eating its lunch for several years, and it continues to drop.
But shouldn’t it? I can’t say for sure that immoral lenders can take all the blame for the housing crises, but dammit, read the fine print, and if you cannot afford it, you cannot afford it!
Save your damn money, live in a more modest home, buy a cheaper car…I just don’t get it.
This seems to me to be made out to be solely a predatory lending issue, when it actually is an issue of people being willing to sacrifice the future for the here and now, for whatever reason. People signing onto variable interest loans are largely getting what they deserve…a bad loan with bad terms that they refused or were cuckolded into believing.
Maybe. If they still want to sell goods and services in the US then the dollar can only fall so far. After a certain point then it won’t just be us going down that toilet alone…
The dollar has been kept artificially high for years by countries like China who want a strong US dollar (and their own currency to be weaker) so that they can better sell goods and services in the US market. The dollar was due for a re-adjustment at some point. And (to a degree…spoke- is absolutely right that after a certain point this will no longer be true) a weak dollar is actually a GOOD thing, at least for US exports of goods and services. It will even make our own goods and services more competitive in our own domestic markets.
How can anyone sell their house at “fire-sale” prices? Most people who bought recently are upside down on their loans and can’t sell at less than the mortgage payoff amount…
They can if the alternative is to stick the keys in an envelop, mail them to the bank and walk away. Or the banks themselves will sell houses they foreclose on (or who they get the keys in the mail). Seriously…this is already happening. There are a lot of people who bought to much house for themselves (or who bought several houses with the intention to flip them for a profit) who are stuck now…do you suppose they will all be able to hold on to them indefinitely to get out of the house what they put into it? And the banks to?
I’m late to the party and have only skimmed the thread.
I heard on NPR the other day that the idea of lowering interest rates is to allow money to be borrowed at a cheaper rate. They said that banks/lenders are not lowering rates significantly because they took a bath recently and want to maximise their profits instead of reducing their lending rates. Is this true? If so, what responsibility do the banks have to play by the traditionally accepted rules? What incentive do they have?
Though I guess it was good when our currency was being kept at an artificially high level for the last few years. I suppose there is no way to change it over to another currency?? The dollar is likely to drop even further before it levels off and eventually starts to recover (somewhat).