Hopelessly

Someone commented on another blog that all of the young couples he knows have given up hoping that they will ever be able to purchase a "starter home". Then there are the stories of all of the young couples who leave their communities and families, move out of state, just so that they can buy an affordable house so that they can raise a family. And then there are all the folks who "cash out" and move out of state. I have met such folks and you probably have too.

Apologists argue that house prices are justified, "they aren't making any more land", "the economy is strong", "people are earning more". Bah!

The fact of the matter is that affordability has dropped so much that only people who currently own a house can now afford to "buy" another one; the "buy-up" chain is broken. This appears to be true in Marin.

Personally, I don't need to buy a house but I deeply sympathise with all those folks who want to because at one time, not terribly long ago, I was standing in their shoes. I don't pretend to be a journalist. I speak my mind and express what's in my heart. And I sometimes make (admittedly) politically incorrect comments here on this blog because I think them to be at the very least closer to the truth than what you will get in the mainstream media. And what do I get in return? What is my reward? Abuse. Abuse from the Marin IJ, abuse from readers with vested interests, and abuse from a society that punishes those who think for themselves and who refuse to both unquestioningly tow the line and become one with the herd. And I'm sick of it.

The fact of the matter is that something is wrong here; something is broken. The American Dream is fading fast; it might have already died. Shame on all of you who callously claim 'if you can't afford to live here then move somewhere where it is cheaper; if you don't make the kind of money you need to buy here then you are just a loser'. We (young and old, rich and poor, working class and trust babies, etc.) ARE the community and we all have the right to live near our families and in the communities that we consider to be home. The fact that this is increasingly difficult for most and impossible for some implies to me that something is terribly wrong and needs to be fixed.

Like I said before in a previous post, I don't give a rat's ass about speculative bubbles in the stock market, etc. because people don't live in stocks and people typically won't take on life-altering amounts of debt to buy stocks. Ah, but houses are another matter altogether. People need homes. Families need homes. Society needs healthy communities; healthy communities need extended families, a working class, affordable housing. Communities today are fragmenting and families are being driven apart. This cannot be good.

I'm done arguing that there is a housing bubble here in Marin and elsewhere; it is a fact IMO and the mainstream media is finally coming to terms with it which means the public will soon be coming to terms with it. At this point, claims to the contrary are nothing more than denial and cognitive dissonance. Either the bubble will burst and prices will return to healthy levels or it won't. If it doesn't, if our collective greed prevents it, if our spineless Fed and owned elected officials fail to deal with it in real terms, then this country is screwed on many levels.

When the "dust settles", when the housing bubble bursts as I and others believe it must, I hope we finally learn our lesson this time. And I hope We the People wake up and take action.

Am I full of it? Then please, set me straight.

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PS - For the heck of it I put together a list of the non-quantitative things that indicate to me that there is a housing bubble (as opposed to what I was doing, compiling statistics and making charts). It's an on-going project of course. In order that this post have some value (this IS a web log after all) I thought I'd share it. Maybe you have items you want to add:

• People buying property sight-unseen.
• Flippers greedily snapping up multiple condos at a time.
• Real estate is referred to as a "can't lose" investment.
• Young couples who are so frightened that they will be left behind.
• People with no savings and/or no income are considered some of the best candidates to get mortgage loans.
• Where essentially all first-time buyers are forced to get an interest-only, no money down loan ("toxic" loan) because affordability is at an all-time low.
• There is a complete disconnect between house prices and rents.
• Agents and builders alike making their outrageous proclamations about an ever-rising market.
• The over use of platitudes like "it's different this time", "they aren't making any more land", "real estate only goes up", etc.
• Fear mongering -- "buy now before you are priced out."
• "New Era" thinking -- "it's different this time".
• When houses are doubling and tripling in price in three short years and yet there has been no corresponding change in fundamentals. Salaries and wages have not increased significantly. The population has not increased sufficiently. There is no increased demand other than the speculative demand itself (a classic speculative mania feedback loop).
• When the people who jumped on the bandwagon during the .com era and became web designers thinking they'd get rich quick, who then jumped on and became day-traders thinking they'd get rich quick, and who have recently jumped on and become realtors thinking they'd get rich quick. (If you want to know what the next bubble will be I think all you have to do is figure out what the recent wannabe realtors are jumping into next.)
• The rise of real estate investing/flipping clubs, web sites, TV shows, akin to the stock day-trading clubs and investing programs.
• Frenzy. Bidding wars, multiple rounds of bidding, and properties selling within just hours. People camping at properties so as to be the first to bid. Housing lotteries.
• People using ARMs (actually, forced to use) when interest rates could only go up in the future.
• Talk about how in the future the only way anyone would be able to buy a house is if they already own a house.
• When the median income needed to buy the median priced CA house is in the neighborhood of $250,000/year (depending on locale; assuming 20% down, 30 year fixed) and yet the actual median income is far less than half that amount.
• When three years ago you could buy a "starter home" with your salary at that time but today, when you are making more, you can no longer afford to buy that same "starter home".
• Buyers had to write letters to the seller, include photos of their kids, etc., make promises to feed the local wild life.
• Buyers who do not occupy their recent purchase and are willing to rent it at a loss.
• When my idiot relative boasted about being an RE genius when if fact he just lucked into buying at a good time and couldn't afford to move anywhere else.