Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (26996)	2/9/2005 7:45:10 PM
From: Tradelite	Respond to of 306849

<<I would venture to guess that a very large number of people on either coast live in and can afford to live in a house which they cannot afford to buy at the current appraisal value with their current incomes. So the "cost of housing" (what they spend monthly on housing) is in line with their incomes without the price of the house being anywhere near it.>> That is certainly true in my personal case, and that of almost everyone I know, except for the CEOs/founders of a few NYSE, AMEX, and NASDAQ companies who I happen to know, who reportedly have more money than God.

To: GraceZ who wrote (26996)	2/10/2005 9:25:25 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 306849

Every house I've ever bought was below replacement cost you seem not to be aware of the price difference between old structures and new structures. old structures lose value over time, so naturally they will be worth less than the cost of replacing them with a new structure. this is called "depreciation". left unmaintained, a structure will depreciate to the point that it is worthless. ceteris paribus, an older structure will be cheaper than a newer structure due to improvements in the new structure, cumulative depreciation in the older structure, and a discount for the older structure's ongoing upkeep costs. so, you must be careful not to compare apples and oranges. Regardless of what you and your friends might be doing, home equity in aggregate is higher than it's ever been, it's at a historical high. well, i can't speak for my friends, but i paid my house off many years ago. the idea that high home equity in and of itself is somehow meaningful is prima facie ridiculous. your statement is solely dependent on ongoing bubble prices. it is like declaring that it is glorious that CSCO was at $82 and created "wealth" of $600 billion, while ignoring the record-high margin levels and ridiculous valuations of the time. of course it was phantom bubble wealth and 90% of it evaporated in the wake of the bubble liquidation. likewise, housing market values in the current bubble hot spots are in the aggregate phantom wealth. the odd smart person here or there will cash out with a windfall, but in the aggregate we cannot all cash out. all the people in California cannot magically become millionaires just because somebody grossly overpays at the margin before the bubble ends. thus the majority banking on this phantom wealth will encounter the situation Wile E. Coyote has made famous. as the bubble implodes and phantom wealth disappears, what will most assuredly remain is all the debt, which now stands at a an all-time high in both absolute and equity-percentage terms. this will no doubt ensure further pain on the downside as overleveraged homeowners are forced to liquidate into a weak market. your dream of national wealth through a housing bubble will unfortunately turn to rubble.