Too much talk about a bubble

First, here is an announcement from the US Secretary of Treasury:
-----------------------------
January 6, 2006
JS-3073
John Snow, US Treasury Secretary

"The year 2005 was a very good one indeed for the 2 million Americans who
found new jobs. Today's employment report is the latest indication that the
American economy is firing on all cylinders. Before the hurricanes that hit
us so hard this fall, the U.S. economy was generating about 200,000 jobs per
month. After two months affected by the weather - September and October -
it appears we have regained that pace, creating over 400,000 jobs in the
past two months. I also note that we have enjoyed 31 straight months of job
growth and, during that time, have added more than 4.6 million jobs.

"As we begin 2006, we have every reason to be optimistic that this economy -
the most flexible, resilient and robust in the world - will continue to grow
and create good jobs. The private sector, particularly America's
entrepreneurs and small businesses, will continue to be the engine of the
economy as long as government continues to give them the freedom they need
to do so. Making the President's tax cuts permanent is the most important
thing we can do in the coming months to make sure the economic environment
in 2006 is as healthy, and as good for job-seekers, as it was in 2005."

------------------

Lots of talk about the bubble focuses on affordablity and the fact that
personal income are not rising as fast as housing prices. This is a real
issue undoubtedly. But, today's announcement from the Secretary of Treasury
tells us that the economy is expanding and we are adding lots of jobs and as
jobs increase, competition drives income upward via wage increase and
unemployemnt goes down which means the overall household income goes up. I
readily submit that wages will not rise as fast as house prices did in
general. But, I also submit that many people have been talking about a
major housing bubble since December 1996 including Alan Greenspan and they
missed the market big time and not for one year or two years or three years
etc. What we likely have are tiny bubbles that are regional and when they
pop the whole country does not feel them since they are tiny and they pop at
different times.

Too LITTLE talk about a bubble

I understand that some people would like to dismiss the bubble talk, but
the issue can't be ignored. Lately, there have been bubble related
articles everywhere, from national publications to local media. Still,
some real estate interests are in denial, spinning the story to look
better than it is. It is painfully obvious in many markets that the
tide has turned. It seems to me that the question is not about IF the
real estate bubble will lose air, it is about how much air will be lost.

BOB

Re: Too LITTLE talk about a bubble

"BushkaBob" <> wrote in message
news:
>I understand that some people would like to dismiss the bubble talk, but
> the issue can't be ignored. Lately, there have been bubble related
> articles everywhere, from national publications to local media. Still,
> some real estate interests are in denial, spinning the story to look
> better than it is. It is painfully obvious in many markets that the
> tide has turned. It seems to me that the question is not about IF the

I have been saving articles about the bubble for many years. Of course, if
people keep on saying the word long enough, someday they will get one. But
the fact of the matter is no one has been able to forecast one successfully.
But, what we do know is that that prices normally adjust just like any other
market but unlike the stock market, it is highly unlikely that the
"predicted meltdown" will take place across all markets at one time and thus
the myth of the so called bubble is far fetched. The belief in tiny bubbles
in deifferent markets popping or adjusting at different times is what the
post was about and not "denial".

www.AmericanWest.biz

> real estate bubble will lose air, it is about how much air will be lost.
>
> BOB
>

Re: Too LITTLE talk about a bubble - Here's an example

New York Times writer Martin Fackler, in today's column (1-7-06) writes
"Take it from the Japanese - housing bubbles are painful. Lessons for
US buyers: Avoid risky loans beyond one's means, and don't count on
perpetual home price increases." The columnist explains that Japan
suffered one of the biggest property market collapses in modern history.
Japan is just now beginning to recover from their bursting real estate
bubble. In Japan, land and real estate today is worth less than half
of what it was at its 1991 peak. In the six largest Japanese cities,
residential prices dropped 64% between 1991 and 2005.

Will the same thing happen here in the US? Can we learn from Japan's
similar era of irrational exuberance and subsequent crash?

BOB

Re: Too LITTLE talk about a bubble - Here's an example

"BushkaBob" <> wrote in message
news:
> New York Times writer Martin Fackler, in today's column (1-7-06) writes
> "Take it from the Japanese - housing bubbles are painful. Lessons for

Bob, I agree we need to learn from the Japanese. But may I suggest that we
also look at the diferences in real estate markets between here and Japan.
In Japan, they do not use professional appraisers prior to getting a loan.
Their real estate market is like the stock market. If you want to buy a
stock you just do it even if you borrow all the funds and regardless of what
the stock is worth. In real estate, the lender has a vested interest in
making sure that there is an independent opinion regarding probable market
value. Second, Japan artficially limited supply of land via land use
controls. If you ride the bullet train (Shinkansen) between Narita and
Yokohama, you see lots of land available but you can not build on it. This
has pushed prices to astronomical levels based on government constraints and
not market induced supply and demand. In the US, by and large, we are not
constrained as much regarding land use although some of us in the industry
claim so so that we can always complain. Third, the bubble in Japan was
preceded by the stock market crash which has caused the real estate market
to crash. The US stock market did not crash the real estate market. On the
contrary, it made it even stronger one would argue. I can go on and on but
the point, there many diferences and Japan was prone to a single super
bubble but the US market is a collection regional markets with tiny bubbles
instead of one super bubble. While in the future, we maybe moving towards
more influence on the national level since credit and appraisal are national
coupled with the increased conversion of the market to securities to be
bought and sold nationally, but in my opinion, real estate is still local to
a large extent and hence the tiny bubbles.

> US buyers: Avoid risky loans beyond one's means, and don't count on
> perpetual home price increases." The columnist explains that Japan
> suffered one of the biggest property market collapses in modern history.
> Japan is just now beginning to recover from their bursting real estate
> bubble. In Japan, land and real estate today is worth less than half
> of what it was at its 1991 peak. In the six largest Japanese cities,
> residential prices dropped 64% between 1991 and 2005.
>
> Will the same thing happen here in the US? Can we learn from Japan's
> similar era of irrational exuberance and subsequent crash?
>
> BOB
>

Re: Too LITTLE talk about a bubble - Here's an example

"CalNeva" <> wrote in message
news:y5Wvf.12375$
>
> "BushkaBob" <> wrote in message
> news:
>> New York Times writer Martin Fackler, in today's column (1-7-06) writes
>> "Take it from the Japanese - housing bubbles are painful. Lessons for
>
Bob, I agree we need to learn from the Japanese. But may I suggest that we
also look at the diferences in real estate markets between here and Japan.
In Japan, they do not use professional appraisers prior to getting a loan.
Their real estate market is like the stock market. If you want to buy a
stock you just do it even if you borrow all the funds and regardless of what
the stock is worth. In real estate, the lender has a vested interest in
making sure that there is an independent opinion regarding probable market
value. Second, Japan artficially limited supply of land via land use
controls. If you ride the bullet train (Shinkansen) between Narita and
Yokohama, you see lots of land available but you can not build on it. This
has pushed prices to astronomical levels based on government constraints and
not market induced supply and demand. In the US, by and large, we are not
constrained as much regarding land use although some of us in the industry
claim so so that we can always complain. Third, the bubble in Japan was
preceded by the stock market crash which has caused the real estate market
to crash. The US stock market did not crash the real estate market. On the
contrary, it made it even stronger one would argue. I can go on and on but
the point, there many diferences and Japan was prone to a single super
bubble but the US market is a collection regional markets with tiny bubbles
instead of one super bubble. While in the future, we maybe moving towards
more influence on the national level since credit and appraisal are national
coupled with the increased conversion of the market to securities to be
bought and sold nationally, but in my opinion, real estate is still local to
a large extent and hence the tiny bubbles.



..
>
>> US buyers: Avoid risky loans beyond one's means, and don't count on
>> perpetual home price increases." The columnist explains that Japan
>> suffered one of the biggest property market collapses in modern history.
>> Japan is just now beginning to recover from their bursting real estate
>> bubble. In Japan, land and real estate today is worth less than half
>> of what it was at its 1991 peak. In the six largest Japanese cities,
>> residential prices dropped 64% between 1991 and 2005.
>>
>> Will the same thing happen here in the US? Can we learn from Japan's
>> similar era of irrational exuberance and subsequent crash?
>>
>> BOB
>>
>
>

Re: Too LITTLE talk about a bubble - Here's an example

"BushkaBob" <> wrote in message
news:
> New York Times writer Martin Fackler, in today's column (1-7-06) writes
> "Take it from the Japanese - housing bubbles are painful. Lessons for

Bob, I tried to read the article you mentioned above but I found out that
today's article by Martin Fackler is about American beef Back on the Menu in
Japan. It is possible that I have missed another article with today's date.
At any rate, I would love to read it if you can post here.

Thanks a lot!



> US buyers: Avoid risky loans beyond one's means, and don't count on
> perpetual home price increases." The columnist explains that Japan
> suffered one of the biggest property market collapses in modern history.
> Japan is just now beginning to recover from their bursting real estate
> bubble. In Japan, land and real estate today is worth less than half
> of what it was at its 1991 peak. In the six largest Japanese cities,
> residential prices dropped 64% between 1991 and 2005.
>
> Will the same thing happen here in the US? Can we learn from Japan's
> similar era of irrational exuberance and subsequent crash?
>
> BOB
>

Re: Too LITTLE talk about a bubble - Here's an example

On Sat, 7 Jan 2006 14:22:33 -0600, (BushkaBob)
wrote:

>Will the same thing happen here in the US? Can we learn from Japan's
>similar era of irrational exuberance and subsequent crash?

Probably not. The U.S. didn't seem to learn anything from history when
it elected Bush, so it also won't for the real estate crash.

Re: Too much talk about a bubble

On Fri, 06 Jan 2006 23:57:04 GMT, "CalNeva" <>
wrote:

>
>First, here is an announcement from the US Secretary of Treasury:
>-----------------------------
>January 6, 2006
>JS-3073
>John Snow, US Treasury Secretary
>
>"The year 2005 was a very good one indeed for the 2 million Americans who
>found new jobs. Today's employment report is the latest indication that the
>American economy is firing on all cylinders. Before the hurricanes that hit
>us so hard this fall, the U.S. economy was generating about 200,000 jobs per
>month. After two months affected by the weather - September and October -
>it appears we have regained that pace, creating over 400,000 jobs in the
>past two months. I also note that we have enjoyed 31 straight months of job
>growth and, during that time, have added more than 4.6 million jobs.
>
>"As we begin 2006, we have every reason to be optimistic that this economy -
>the most flexible, resilient and robust in the world - will continue to grow
>and create good jobs. The private sector, particularly America's
>entrepreneurs and small businesses, will continue to be the engine of the
>economy as long as government continues to give them the freedom they need
>to do so. Making the President's tax cuts permanent is the most important
>thing we can do in the coming months to make sure the economic environment
>in 2006 is as healthy, and as good for job-seekers, as it was in 2005."
>
>------------------
>
>Lots of talk about the bubble focuses on affordablity and the fact that
>personal income are not rising as fast as housing prices. This is a real
>issue undoubtedly. But, today's announcement from the Secretary of Treasury
>tells us that the economy is expanding and we are adding lots of jobs and as
>jobs increase, competition drives income upward via wage increase and
>unemployemnt goes down which means the overall household income goes up. I
>readily submit that wages will not rise as fast as house prices did in
>general. But, I also submit that many people have been talking about a
>major housing bubble since December 1996 including Alan Greenspan and they
>missed the market big time and not for one year or two years or three years
>etc. What we likely have are tiny bubbles that are regional and when they
>pop the whole country does not feel them since they are tiny and they pop at
>different times.
>
>
>
ADDING JOBS? or is it just lateral job creation, for employees who
lost their jobs from manufacturing plant shut downs?

Can the words of the Secretary of Treasury be trusted?
The dollar began sliding in 2000, then-Treasury Secretary John O'Neill
said the Bush administration would maintain a strong dollar policy.
When O'Neill was replaced with John Snow, the new secretary said the
same thing. "It still kept falling," "We can't depend on the dollar,
with the debt, the twin deficits and the trade gap."

Re: Too much talk about a bubble

<
> On Fri, 06 Jan 2006 23:57:04 GMT, "CalNeva" <>
> wrote:
>>Lots of talk about the bubble focuses on affordablity and the fact that
>>personal income are not rising as fast as housing prices. This is a real
>>issue undoubtedly. But, today's announcement from the Secretary of
>>Treasury
>>tells us that the economy is expanding and we are adding lots of jobs and
>>as
>>jobs increase, competition drives income upward via wage increase and
>>unemployemnt goes down which means the overall household income goes up.
>>I
>>readily submit that wages will not rise as fast as house prices did in
>>general. But, I also submit that many people have been talking about a
>>major housing bubble since December 1996 including Alan Greenspan and they
>>missed the market big time and not for one year or two years or three
>>years
>>etc. What we likely have are tiny bubbles that are regional and when they
>>pop the whole country does not feel them since they are tiny and they pop
>>at
>>different times.
>>
>>
>>
> ADDING JOBS? or is it just lateral job creation, for employees who
> lost their jobs from manufacturing plant shut downs?

I agree with you that some jobs created are possibly being filled by people
who were laid off. But, the main point is still that household incomes are
going up since some people are getting jobs.

>
> Can the words of the Secretary of Treasury be trusted?

Can Sec. Snow be trusted? He is a political appointee but some of what he is
saying is true at least in our area.

> The dollar began sliding in 2000, then-Treasury Secretary John O'Neill

My guess on this issue is that the US government and Sec. O'Neill were
saying something and doing something else on purpose. The US wanted to see
the currency drop to make US exports affordable to generate jobs in the US
but they could not do so openly since they were also making commitments to
the G-8 about a stronger dollar. I could be wrong on this but that was my
take on it. But, I go back to your main point can we trust a political
appointee? I find it hard to give a categorical yes on this one.



> said the Bush administration would maintain a strong dollar policy.
> When O'Neill was replaced with John Snow, the new secretary said the
> same thing. "It still kept falling," "We can't depend on the dollar,
> with the debt, the twin deficits and the trade gap."
>

Re: Too much talk about a bubble

CalNeva wrote:
>
> ... What we likely have are tiny bubbles that are regional and when they
> pop the whole country does not feel them since they are tiny and they pop at
> different times.

Affordability. So long as a *lot* of folks can still afford to buy a
house it's regular old supply and demand. For vest areas within the
US house purchasing remains affordable by over 50% of family.
Therefore these areas are not in a bubble.

Are there bubble regions? Find a place where the median house
cannot be afforded by over 65% of families and you should suspect
that region is in a bubble. Try maping those places. It's a small
fraction of the US. Must be interesting to live in one of those areas.

Re: Too much talk about a bubble

On Fri, 06 Jan 2006 23:57:04 GMT, "CalNeva" <>
wrote:

>
>First, here is an announcement from the US Secretary of Treasury:
>-----------------------------
>January 6, 2006
>JS-3073
>John Snow, US Treasury Secretary
>
>"The year 2005 was a very good one indeed for the 2 million Americans who
>found new jobs. Today's employment report is the latest indication that the
>American economy is firing on all cylinders. Before the hurricanes that hit
>us so hard this fall, the U.S. economy was generating about 200,000 jobs per
>month. After two months affected by the weather - September and October -
>it appears we have regained that pace, creating over 400,000 jobs in the
>past two months. I also note that we have enjoyed 31 straight months of job
>growth and, during that time, have added more than 4.6 million jobs.
>
>"As we begin 2006, we have every reason to be optimistic that this economy -
>the most flexible, resilient and robust in the world - will continue to grow
>and create good jobs. The private sector, particularly America's
>entrepreneurs and small businesses, will continue to be the engine of the
>economy as long as government continues to give them the freedom they need
>to do so. Making the President's tax cuts permanent is the most important
>thing we can do in the coming months to make sure the economic environment
>in 2006 is as healthy, and as good for job-seekers, as it was in 2005."
>
>------------------
>
>Lots of talk about the bubble focuses on affordablity and the fact that
>personal income are not rising as fast as housing prices. This is a real
>issue undoubtedly. But, today's announcement from the Secretary of Treasury
>tells us that the economy is expanding and we are adding lots of jobs and as
>jobs increase, competition drives income upward via wage increase and
>unemployemnt goes down which means the overall household income goes up. I
>readily submit that wages will not rise as fast as house prices did in
>general. But, I also submit that many people have been talking about a
>major housing bubble since December 1996 including Alan Greenspan and they
>missed the market big time and not for one year or two years or three years
>etc. What we likely have are tiny bubbles that are regional and when they
>pop the whole country does not feel them since they are tiny and they pop at
>different times.
>
>
>

-30 million american workers.... that is one in four.... work at jobs
with wages too low to provide life's basics.

-One of 6 of you out there are unemployed or underemployed.

-More jobs have gone overseas this year than ever before, roughly
830,000 by the end of 2005 and 3.4 million jobs by the end of 2015.

Re: Too much talk about a bubble

"Doug Freyburger" <> wrote in message
news:
> CalNeva wrote:
>>
>> ... What we likely have are tiny bubbles that are regional and when they
>> pop the whole country does not feel them since they are tiny and they pop
>> at
>> different times.
>
> Affordability. So long as a *lot* of folks can still afford to buy a

Agree. Affordability is now the main issue but its is uniformly distributed
nationawide as you pointed out!

> house it's regular old supply and demand. For vest areas within the
> US house purchasing remains affordable by over 50% of family.
> Therefore these areas are not in a bubble.
>
> Are there bubble regions? Find a place where the median house
> cannot be afforded by over 65% of families and you should suspect
> that region is in a bubble. Try maping those places. It's a small
> fraction of the US. Must be interesting to live in one of those areas.
>

Re: Too much talk about a bubble

<
> On Fri, 06 Jan 2006 23:57:04 GMT, "CalNeva" <>
> wrote:
>
>>
>>First, here is an announcement from the US Secretary of Treasury:
>>-----------------------------
>>January 6, 2006
>>JS-3073
>>John Snow, US Treasury Secretary
>>
>>"The year 2005 was a very good one indeed for the 2 million Americans who
>>found new jobs. Today's employment report is the latest indication that
>>the
>>American economy is firing on all cylinders. Before the hurricanes that
>>hit
>>us so hard this fall, the U.S. economy was generating about 200,000 jobs
>>per
>>month. After two months affected by the weather - September and October -
>>it appears we have regained that pace, creating over 400,000 jobs in the
>>past two months. I also note that we have enjoyed 31 straight months of
>>job
>>growth and, during that time, have added more than 4.6 million jobs.
>>
>>"As we begin 2006, we have every reason to be optimistic that this
>>economy -
>>the most flexible, resilient and robust in the world - will continue to
>>grow
>>and create good jobs. The private sector, particularly America's
>>entrepreneurs and small businesses, will continue to be the engine of the
>>economy as long as government continues to give them the freedom they need
>>to do so. Making the President's tax cuts permanent is the most important
>>thing we can do in the coming months to make sure the economic environment
>>in 2006 is as healthy, and as good for job-seekers, as it was in 2005."
>>
>>------------------
>>
>>Lots of talk about the bubble focuses on affordablity and the fact that
>>personal income are not rising as fast as housing prices. This is a real
>>issue undoubtedly. But, today's announcement from the Secretary of
>>Treasury
>>tells us that the economy is expanding and we are adding lots of jobs and
>>as
>>jobs increase, competition drives income upward via wage increase and
>>unemployemnt goes down which means the overall household income goes up.
>>I
>>readily submit that wages will not rise as fast as house prices did in
>>general. But, I also submit that many people have been talking about a
>>major housing bubble since December 1996 including Alan Greenspan and they
>>missed the market big time and not for one year or two years or three
>>years
>>etc. What we likely have are tiny bubbles that are regional and when they
>>pop the whole country does not feel them since they are tiny and they pop
>>at
>>different times.
>>
>>
>>
>
> -30 million american workers.... that is one in four.... work at jobs
> with wages too low to provide life's basics.
>
> -One of 6 of you out there are unemployed or underemployed.
>
> -More jobs have gone overseas this year than ever before, roughly
> 830,000 by the end of 2005 and 3.4 million jobs by the end of 2015.
>

I know that lots of people are hurting from the offshoring of jobs to China
and India and that is a big problem. But today, we saw the DOW go over
11,000. There are many signs that show that the economy is improving but
like you said there are some people that are unemployed and/or under
employed and that is a fact.

>

Re: Too much talk about a bubble

" Bob, I agree we need to learn from the Japanese. But may I suggest
that we
also look at the diferences in real estate markets between here and
Japan.
In Japan, they do not use professional appraisers prior to getting a
loan.
Their real estate market is like the stock market. If you want to buy
a
stock you just do it even if you borrow all the funds and regardless of
what
the stock is worth. In real estate, the lender has a vested interest
in
making sure that there is an independent opinion regarding probable
market
value. Second, Japan artficially limited supply of land via land use
controls. If you ride the bullet train (Shinkansen) between Narita and

Yokohama, you see lots of land available but you can not build on it.
This
has pushed prices to astronomical levels based on government
constraints and
not market induced supply and demand. In the US, by and large, we are
not
constrained as much regarding land use although some of us in the
industry
claim so so that we can always complain. Third, the bubble in Japan was

preceded by the stock market crash which has caused the real estate
market
to crash. The US stock market did not crash the real estate market.
On the
contrary, it made it even stronger one would argue. I can go on and on
but
the point, there many diferences and Japan was prone to a single super
bubble but the US market is a collection regional markets with tiny
bubbles
instead of one super bubble. While in the future, we maybe moving
towards
more influence on the national level since credit and appraisal are
national
coupled with the increased conversion of the market to securities to be

bought and sold nationally, but in my opinion, real estate is still
local to
a large extent and hence the tiny bubbles. "

I agree it is a collection of local markets. California is definitelty
a bubble. In some desirable California localities prices will not fall
because people want to live there.

Incomes and Interest rates determine the ability to make mortgage
payments. That is the bottom line.