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October 18, 2007


Rob Dawg

For the record, we have Miami dropping (32.07%) from this month to 2011.

In real dollar terms or inflation adjusted? I'm thinking personally that What sells for $100k 2007 dollars will be worth $67.93 2011 dollars.

IMO the big problem with govt figures is buried deep in the assumptions. Most importantly; the demand and household formation categories.

(Are we too late to the Beazer going away party?)

raj prasad

If dollar keeps going down then real estate can not drop much (actually it will appreciate) because any hard asset is better than paper money


Rob Dawg: The numbers in the post are in today's dollars.

Raj: Well, the dollar kept going down for the last few months and real estate kept going down a lot as well. There goes that theory. Any hard asset is not better than paper money. There are always limits. Suppose I sold you a $50k benz for $100k, via a 6% loan, in a period of 4% inflation. Who would be better off in 4 years? First, you overpaid for the car, by 100%, second the car is depreciating by about 15% per year, third you have debt service in which your monies are not fully amortizing the principal (interest going to the bank). Meanwhile, I have your cash and despite the inflationary hit I am ahead of you and will stay ahead of you as long as I don't have an "outlier" occurence that would wipe me out.

Well, here we have the same situation in some real estate markets. Those who leveraged 90% or more and bought at top of the market with a negative cap rate, are @#%^, to say the least.

And yes, cash would be preferable over the scenario I just outlined.


interesting graphs and point of view. Keep in mind that what makes 1989 so different then 99-2007 is the availability of financing via the secondary market in particuliar Jumbo loans. Since we are returning to the good old days of the mortgage and RE financing we can expect sales velocity to return to per 99 levels meaning less then 4 million units per year.
Anyway enjoy your blog nice to know somebody has a crystal ball!


@rob dawg
my mistake. the figures are not adjusted for inflation.

not just jumbo loans, but all loans not held on the balance sheet. primarily loans that relaxed relatively stringent (read as prudent) lending stipulations and requirements such as downpayment, credit history, seller held seconds, income'asset check, max ltvs, etc. it is the more exotic stuff that really drove the markets and it will be the dearth of that stuff that will cause reversion to mean.

Rob Dawg

Regg, no problem. That's why I asked for clarification. Heck, you can pick your poison wrt inflation. BLS CPI at the criminally low 2.4% up to the Shadow Stats selectively biased M3 at 13%. And coming soon I fully expect CPI to be modified to reflect less OER and more direct housing ownership costs. At 27% of the net CPI this alone will allow the Feds to hide another 200-300 basis points of inflation inside any housing price declines (sector deflation).

Who pulled the plug on Countrywide Friday? Just technical momemtum or not wanting to own over the weekend? Look at that 3:30PM short covering.


I have commented several times how I felt about the government inflation numbers. Like residential real estate, inflation seems to be local in nature, just not so much so. For instance, the real estate inflation varied significantly in Manhattan and Detroit. Housing is by far the largest expense for NYers. It also has several national characteristics such as fuel pricing which varies by up to about 15% state to state but moves in tandem. Then there are the global correlatios: I'll bet my back yard petunias that China will start exporting inflation right along with thier glossy computer paper.

I am far from an economist, but I am good at noticing what goes on around me. My observations may be anecdotal, sloppy and unscientific, but they are also accurate.

As for CountryWide, I know the stock weakened when the news of the SEC probe into Angelo's stock sales hit the wire.

Peter Hollings

Very interesting.

Now, if these forecasts are true, there will be trillions of dollars worth of mortgages under water. Isn't the FED likely to create inflation as a solution? But, the FED would have to simultaneously keep rates low or real estate prices would be further depressed?


Low interest rates are not going to help the oversupply issue. Rates are low to begin with, which is why we have over supply - imprudent speculation. The Fed has already created inflation (IMHO) - look at the cost to eat, fuel your car, obtain housing (rent or own), heat your home, etc.


Foreclosure mainly occurs when the borrower skips the monthly installments which have to be paid to the lender

Tax Liens

Foreclosure is actually good for a lot of homeowners.
For those who bought at low price and kept refinancing to extract cash from their home as home price rose, they have little equity on that ATM machine. Foreclosure is equivalent to selling the home at inflated price to the bank.For those who bought at high price with little down payment, they could just return the home to the bank, the bank would fire-sell the home to some vulture investors at low price

Cheap Jordans

If a thing is worth doing it is worth doing well.

homes for sale newport coast

I noticed that the numbers appeared to be too optimistic, at least according to my grassroots investor's gut instincts.

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