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RE: Shiller Weighs In

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  • #31
    Re: inflation and house prices

    don't forget demographics. as the baby boom generation formed households and then traded up as their incomes rose with increased work experience, the housing market blossomed with the home owning population. now the boomers have started downsizing, and they're not going to be able to sell their homes to their 20-somethings who are living in their basements.
    Last edited by jk; January 28, 2013, 02:07 PM.

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    • #32
      Re: inflation and house prices

      Originally posted by jk View Post
      don't forget demographics. as the baby boom generation formed households and then traded up as their incomes rose with increased work experience, the housing market blossomed with the home owning population. now the boomers have started downsizing, and they're not going to be able to sell their homes to their 20-somethings who ares living in their basements.
      Even downsizing (in houses) is now a victim of the times. Just heard this morning that a retiring neighbour who owns some property near me has discovered that building a new, smaller house is going to be more expensive than what he can sell his older, bigger house for. So he and his wife are going to stay put...

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      • #33
        Re: inflation and house prices

        Originally posted by Polish_Silver View Post
        I kind of agree, but without inflation, mortgage rates in general would be a lot lower, making
        homes more affordable.

        Right now the mortage rates are below inflation, and I think that is a relatively rare situation,
        due to our financial system and government manipulation of interest rates.

        I wonder if you could short the dollar by going long real estate?
        Yes you can! That's what investing in gold/silver is all about. It is effectively implementing an arbitrage by going short financial assets (i.e. taking a fixed, low-interest rate loan on a house) and going long tangible assets (buying gold/silver). Each year that the dollar devalues through inflation, the value of the loan decreases, while the value of your gold and silver increases.

        If you have additional cash to spend, it is better to purchase precious metals with it than to pay down the principal on the loan.

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        • #34
          Re: inflation and house prices

          If interest rates stay this low for 5-10 years and you bought a house now on a fixed low rate -30 yr. with the plan on staying there at least 20 yrs.?Then interest rates start to go up dramatically if the expected inflation arrives in 5-10 years would not the buyer be better off than renting?Will rents also go up dramatically?How much more will rent increase in those 20 yrs.?

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          • #35
            Re: Shiller Weighs In

            Originally posted by jk View Post
            shiller has said for many years that housing only tracks inflation. here's a link to an article about his work, published in the ny times magazine in march '06, describing his study of real estate in amsterdam going back to the early 1600's. some of the same houses are still around today! unfortunately the article no longer has the huge photo of stately homes, with price histories spanning roughly 400 years, along one of amsterdam's central canals.
            Really good article. Thanks for sharing.

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            • #36
              Re: Shiller Weighs In

              Originally posted by don View Post
              or in sheeple-ese, "what my house is really worth".
              Yeah, that's classic. And the practice by those who've bought in the last couple of years of stating what they paid relative to the price at the bubble high; e.g. "I paid $150,000 for a $300,000 house!" Yeah, just keep thinking that.

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              • #37
                Re: Shiller Weighs In

                I am very interested in your data analysis.

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                • #38
                  Re: Shiller Weighs In

                  Originally posted by Onlooker View Post
                  Yeah, that's classic. And the practice by those who've bought in the last couple of years of stating what they paid relative to the price at the bubble high; e.g. "I paid $150,000 for a $300,000 house!" Yeah, just keep thinking that.
                  I hear that all the time and it still makes me chuckle. Nobody ever says, " I paid $300,000 for a house that will only be worth $150,000 some day".

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                  • #39
                    Re: Shiller's book on house buying

                    JK, the pics are easily found:

                    http://www.google.com/search?q=The+H...w=1920&bih=943

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                    • #40
                      Re: Shiller's book on house buying

                      Originally posted by Slimprofits View Post
                      those are nice, but i'm not sure if one is the actual picture that accompanied the article when first published. iirc, it was a gorgeous 2 page spread, horizontal and covering about 3/4 of the height of each page, with some room for the initial bit of the article along the bottom.

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                      • #41
                        Re: Shiller's book on house buying

                        Shiller also thinks that Gold is a bubble so...

                        http://www.youtube.com/watch?v=Q63aHvySRbQ


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                        • #42
                          Shillers' knowledge of gold

                          Originally posted by verdo View Post
                          Shiller also thinks that Gold is a bubble so...

                          http://www.youtube.com/watch?v=Q63aHvySRbQ
                          I haven't watched the video yet, but I question how much he has studied gold.

                          He has studied stock and property markets in depth, but his analysis is primarily
                          based on the mass psychology of bubbles. If he carries this reasoning over to gold straightforwardly, he will be overlooking important dynamics of gold.

                          In general he is very careful and systematic, so much so that his expertise will tend to be somewhat narrow.

                          I doubt that he has thought through Triffin's dilemma or the implications of the high soverign debt levels.

                          I'll try to watch soon and see what he says . . .

                          Just as I thought. He gave no real analysis, just an opinion. The interviewer compared his statements
                          on stock bubble, housing bubble, now gold bubble.

                          But stocks and houses were a public mania. Gold is not a popular mania, as Faber proved once again.

                          Shiller said "there is no way to quantify it " ( "it" meaning the gold price). "I don't have a number". There are ways to quantify it, though not with precision. Shiller did have numbers for stocks and houses, based on long term trends and fundamental evaluations of dividends, rents, etc.
                          But he doesn't know how to do that analysis for gold, and it is certainly more tricky.

                          Shiller doesn't see that gold is the fourth currency, or that it is insurance against IMS meltdown.
                          He should realize that Gold is not a popular mania way the stocks and houses were. He also doesn't mention that central banks are buying gold. He says we are near the end of the gold bubble, but without a means to evaluate gold, how can he claim that? He knows his analysis is weak, and prevaricates a lot.

                          As for the idea that the US needs to borrow more, and spend on vital infrastructure, what planet is he on? The US has been borrowing north of $1 trillion/year, and where's the infrastructure?

                          We are spending money on bank bailouts, endless wars, over priced health care, etc.
                          Last edited by Polish_Silver; April 02, 2013, 04:05 PM.

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                          • #43
                            Re: Shillers' knowledge of gold

                            Average monthly payment, not inflation adjusted.










                            The horse puckey view on the NAR affordabily index








                            Case Shiller since 1900, with CPI and CPPI adjustments - base year 2000










                            Same, log based

                            http://www.NowAndTheFuture.com

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                            • #44
                              Re: Shillers' knowledge of gold

                              Throw in rapidly rising property taxes, utilities, and insurance and that makes the numbers not look so good either.
                              I cannot comment on maintenance costs. 15 years ago my p-tax was $5000, now it is $8200 and climbing every year. This is on a 2200 sq ft. track home.

                              I was going to write a post about how water is the new gold here.
                              If I set up a payment plan for my water it is $75.00 per month, and I don't use a lot of water 4000 gal / mo for a family of 4.
                              My gas payment plan is $65 per month and my electric is about the same. So now water is my most expensive utility.

                              To add insult to injury the water rates will climb on a schedule that runs out to 2015, to $21.00 per 1000 gallons.

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                              • #45
                                Re: Shillers' knowledge of gold

                                Originally posted by charliebrown View Post
                                Throw in rapidly rising property taxes, utilities, and insurance and that makes the numbers not look so good either.
                                I cannot comment on maintenance costs. 15 years ago my p-tax was $5000, now it is $8200 and climbing every year. This is on a 2200 sq ft. track home.

                                I was going to write a post about how water is the new gold here.
                                If I set up a payment plan for my water it is $75.00 per month, and I don't use a lot of water 4000 gal / mo for a family of 4.
                                My gas payment plan is $65 per month and my electric is about the same. So now water is my most expensive utility.

                                To add insult to injury the water rates will climb on a schedule that runs out to 2015, to $21.00 per 1000 gallons.
                                We average about 2300 US gallons per month and pay about $165 monthly for that. It's the fastest rate of increase utility here and the main driver is increasing government regulations regarding drinking water quality. The water treatment plant equipment redundancy, daily testing standards, written reporting requirements, risk assessment studies, and everything else that has been implemented in the past decade or so is driving costs up at a furious pace. The rules change every single year. The bureaucrats love it because there is no way to counter argue "public safety", so the department keeps hiring more and more people to oversee the masses of new data and submission materials that the annual changes to the regulations require. It's an empire builder's dream come true. Going "off grid" (rainwater catchment and individual residence filtering and treating) is looking better and better...

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