For Housing Crisis, the End Probably Isn’t Near

[Torie]

The buzz is that in the more "desirable" parts of Los Angeles, housing prices seem to be stabilizing now. We shall see. Stuff is still tanking some more in the Inland Empire, and still eroding, albeit more slowly, in Orange County.

[Torie]

Interestingly this means that we can print trillions without causing inflation.

No, matters will stabilize when housing prices get in sinc with incomes. In many places, we are about there.

[Torie]

Interestingly this means that we can print trillions without causing inflation.

No, matters will stabilize when housing prices get in sinc with incomes. In many places, we are about there.

Gentlemen, prices are nice.  But in order to calculate what a "housing bottom" is, you have to at least have a guess at median income.  There's some historical benchmarks here.

Isn't part of the difficulty of prediction, gentlemen, that 'median income' is plummetting at present?

In any case, Tory, we can make any price we want 'in sinc with incomes' if we print more money and make that newly printed money 'income'.  In other words, reflate.

Ya, substantial dollar inflation would cause housing prices to "stabilize," and maybe even increase in nominal dollars, but alas not in real dollars.

[Torie]

Torie - Two questions...

What are house prices like now in the area where you have rentals or where you own?  Also, what is the average salary of those specific areas?

They are down around 20% from the peak where I live in Orange County, about 40% in the desert, and about 15% in the Los Feliz and Silverlake districts of Los Angeles.  In Portland, Oregon, prices are down maybe 15% as well as a guess, but I am less sure. I don't know about average salaries; that would have to be looked up. I read an article that stated that in some areas incomes to housing prices were reaching "normal" ratios for those areas. In the area around my census tract very little is on the market, and there are almost no foreclosures. The same is true in the LA neighborhoods that I mentioned. Folks just are holding on and not selling, waiting for better times. Also it is hard to find jobs elsewhere, so folks are staying put. The housing market in the desert is a mess because it is a resort area, incomes are way down, and it was way overbuilt anyway, with a lot of speculation.

[Torie]

Interestingly this means that we can print trillions without causing inflation.

No, matters will stabilize when housing prices get in sinc with incomes. In many places, we are about there.

Gentlemen, prices are nice.  But in order to calculate what a "housing bottom" is, you have to at least have a guess at median income.  There's some historical benchmarks here.

Isn't part of the difficulty of prediction, gentlemen, that 'median income' is plummetting at present?

In any case, Tory, we can make any price we want 'in sinc with incomes' if we print more money and make that newly printed money 'income'.  In other words, reflate.

Ya, substantial dollar inflation would cause housing prices to "stabilize," and maybe even increase in nominal dollars, but alas not in real dollars.

No, it wouldn't be 'inflation', Torie, it would be 'reflation'.  In other words printing now would just prevent deflation, not cause inflation. 

Ya, maybe for the short term. I am highly skeptical about the medium term.

[Torie]

Prop 13?

[Torie]

Plate tectonics (there is that word again), with God moving the mantles to generate the mountains as a veritable necklace around the sea, has fenced us in sbane.