Posted on 01/03/2011 3:12:31 PM PST by jazusamo
Do people want the prices of cars to skyrocket just because they happen to own a couple of them?
Always worth a bump
The people in the media also have homes in the market. They are protecting their own investment. If the market adjusts to a lower level, the media people's homes will also be devalued.
Everyone's first thought is "how will it affect my property?"
Just sent this to my email list.
Thanks for the ping jaz.
I would ad that j-school and communications grads often don't know political economics from home economics.
I'd add that pricing must be parity with what the available jobs in the area will sustain via cash or financing. If people are employed but competing with 3rd world salaries, the current prices will only diminish for lack of demand.
The obama regime has made it clear they do not feel the concept of capitalism leads to prosperity. They are actively working to redesign how the economy works via socialist models.
I don't see this leading to a recovery. I see it leading to another Venezuela/Argentina scenario.
What about 'saving' the market from Government's attempts to save the market?
If GovCo can kill a market through its involvement, manipulation and general interference, then that market can be 'saved' by removing GovCo and letting the natural market forces have their way.
“Do people want the prices of cars to skyrocket just because they happen to own a couple of them?”
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People were sold the idea that housing is a great investment which may be true for some professional investors who know what they are doing but there is a fallacy concerning “appreciation” of existing houses. I once got into a long discussion with a woman who sold real estate about this fallacy. This occurred back in 1991. She insisted that site built houses ALWAYS appreciate while factory built housing depreciates. I told her that NO kind of housing ALWAYS appreciates, in fact with the exclusion of certain historical buildings or some very unique houses there is NO appreciation in site built housing at all. She thought I was crazy at first but when I finished she agreed with me.
It wouldn't matter if she was right and it DID always appreciate. It's not an investment, because you can't cash in without ending up homeless. If, like in most transactions, you're selling one house and moving into another, it's all on paper anyway. If the market has moved in such a way that the house you paid $80/ft for is now going for $200, here's a newsflash -- so is the one you're buying!!
Now, there's plenty of exceptions. If the home really IS an investment, i.e. not your primary residence. If the new house you're buying is in another market, which HASN'T appreciated, if you're having a custom house built so the new house sells at 2010 prices, and you sell the old one at 2011 prices, if you're moving down in house or completely out (like retiring to an assisted living community) and so on.
But the bread and butter of the market is people exchanging one house for another, usually a more expensive one, and those people are screwed in a rising market. Then you have to think about what happens to people who aren't buying or selling. Somehow the counties always "forget" to index the property tax rates lower to compensate for a bubble, thus giving a windfall to the LEAST deserving sector of society at the expense of those of us who have real jobs. Then when the market crashes, they think they get to whine about all the money they're "losing" when in fact they're no worse off than before, and in all fairness should be rebating all the extra money they embezzled from the homeowners.
It wouldn’t matter if she was right and it DID always appreciate. It’s not an investment, because you can’t cash in without ending up homeless. If, like in most transactions, you’re selling one house and moving into another, it’s all on paper anyway. If the market has moved in such a way that the house you paid $80/ft for is now going for $200, here’s a newsflash — so is the one you’re buying!!
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That is part of what I didn’t state in my post. It isn’t really APPRECIATION, it is only INFLATION which is false appreciation. The other part is that anytime there is enough of a price rise to count as real appreciation the actual appreciation is in the lot, not the house itself. The resale value of the house itself which is the market price of house and lot minus the value of the empty lot without the house is never enough to rebuild the house, that is DEPRECIATION, not appreciation. Land has often appreciated in real inflation adjusted terms, the actual house though, almost never does.
Of course I haven’t even mentioned the topic of maintenance which can run into very large sums for those who must hire a professional for every job. Even for those who do their own work the cost in materials can be considerable, not to mention time. Home ownership is not the great way to make money that some people have imagined it to be, is it?
Yeah, I guess true “appreciation” would be if YOUR house was worth more after 10 years than when you bought it, but an identical brand new one was still going for the price you paid, or at least less than the new, greater value of your house.
That’s the way I see it but most people I know would say that if they have owned a house for fifty years and it can be sold now at a nominal price five times higher than they paid they have made a lot of money. I say they have lost most of their money.
Amen And THANK YOU!
As one of those described above I have been wondering about this since the whole 'crisis' began. In addition, as far as I am concerned the banks that own these sub-prime properties that THEY knowingly bought cannot have been in very desperate financial straits or they would have been selling off these properties for whatever they could get as fast as they could.
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