Comments on: Bubble Sitting Sounds Too Risky http://www.bargaineering.com/articles/bubble-sitting-sounds-too-risky.html personal finance blog with anecdotes, advice and commentary. Sun, 12 Feb 2012 23:30:41 +0000 hourly 1 By: jim http://www.bargaineering.com/articles/bubble-sitting-sounds-too-risky.html/comment-page-1#comment-14762 jim Fri, 11 Aug 2006 19:23:56 +0000 http://www.bargaineering.com/articles/bubble-sitting-sounds-too-risky.html#comment-14762 I mentioned the "housing prices never decrease" merely as something the pundits said while the bubble was expanding, I think in the short term they can decrease on a case by case basis unless you're in an extremely inflated area (as you are) where lots of the ownership is by way of inflation-exposed ARMs. I'm worried about how the bubble has increased the spending of consumers, despite no real wage growth as you mentioned, because eventually that credit will have to be repaid and spending will decrease, affecting our economy as a whole. The US has become too comfortable with the idea of debt, at every level from the government all the way to individuals, and the ramifications will be sweeping. I mentioned the “housing prices never decrease” merely as something the pundits said while the bubble was expanding, I think in the short term they can decrease on a case by case basis unless you’re in an extremely inflated area (as you are) where lots of the ownership is by way of inflation-exposed ARMs.

I’m worried about how the bubble has increased the spending of consumers, despite no real wage growth as you mentioned, because eventually that credit will have to be repaid and spending will decrease, affecting our economy as a whole. The US has become too comfortable with the idea of debt, at every level from the government all the way to individuals, and the ramifications will be sweeping.

]]> By: LAMoneyGuy http://www.bargaineering.com/articles/bubble-sitting-sounds-too-risky.html/comment-page-1#comment-14760 LAMoneyGuy Fri, 11 Aug 2006 18:59:44 +0000 http://www.bargaineering.com/articles/bubble-sitting-sounds-too-risky.html#comment-14760 I agree that selling to bubble sit isn't generally advisable, but only because of the transaction and moving costs. I don't agree that home prices never decrease. I personally witnessed significant home price decreases in southern California about 15 years ago. People will stay in their house if they are able, but because so many bought with risky loans (ARMs, I/O, or the dreaded Neg Am) and stretched their budgets, they may not have that option. Will prices go down 10-15%, or as much as 30-50%? I have no idea. I suspect the former is more likely, but I wouldn't be stunned to see the latter in the "bubble" areas. I was in the investment industry in '99-2002. I saw, heard and believed all the pundits who said that stocks may dip, but "it's a new era" and prices will keep going up. True, but there are periods of great loss along the way. Stocks don't require you to send in more money every month to keep them. Houses do. I also saw the layoffs by Merrill Lynch, Morgan Stanley, Goldman Sachs, Schwab, etc in 2001-2002. The real estate industry is about to go through a similar contraction of jobs. I'm not looking forward to how this will negatively impact the economy. We have seen low wage growth over the last three years, but strong consumer spending. We in the PF blog community criticize people for living beyond their means, and this is justified. But the biggest reason for our country's negative savings rate for the first time since the Great Depression was the HELOC and cash our Refi money that people spent. I agree that selling to bubble sit isn’t generally advisable, but only because of the transaction and moving costs. I don’t agree that home prices never decrease. I personally witnessed significant home price decreases in southern California about 15 years ago. People will stay in their house if they are able, but because so many bought with risky loans (ARMs, I/O, or the dreaded Neg Am) and stretched their budgets, they may not have that option. Will prices go down 10-15%, or as much as 30-50%? I have no idea. I suspect the former is more likely, but I wouldn’t be stunned to see the latter in the “bubble” areas.

I was in the investment industry in ’99-2002. I saw, heard and believed all the pundits who said that stocks may dip, but “it’s a new era” and prices will keep going up. True, but there are periods of great loss along the way. Stocks don’t require you to send in more money every month to keep them. Houses do. I also saw the layoffs by Merrill Lynch, Morgan Stanley, Goldman Sachs, Schwab, etc in 2001-2002. The real estate industry is about to go through a similar contraction of jobs. I’m not looking forward to how this will negatively impact the economy. We have seen low wage growth over the last three years, but strong consumer spending. We in the PF blog community criticize people for living beyond their means, and this is justified. But the biggest reason for our country’s negative savings rate for the first time since the Great Depression was the HELOC and cash our Refi money that people spent.

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