Irvine Housing Blog

If Las Vegas is a success of the free market when unemplyment is trending above 15% then the great depression was a monumental free market achievement.

Las Vegas is a train wreck because of market manipulation. 

As interest rates continue decline as I have predicted with new quantitative easing the impact on both Irvine and Las Vegas will continue to be the same.

There already is inflation and wage inflation you need to look in the right places.  If you are taking a bigger picture view you won’t see it.

The author is wrong when he writes “2. The Fed has pushed down mortgage rates by buying over 10% of all outstanding mortgages in the U.S.—all the toxic garbage loans which the banks were desperate to get off their crippled balance sheets.”

The fed’s purchases were of newly issued GSE securities which are of much higher quality than the toxic assets people think of.  The toxic assets are tranches of MBS based on subprime/alt-a poor collateral, no underwriting mortgages.  The MBS’s the fed bought were at a time when underwriting was much stronger and collateral was not nearly as inflated.

Irvine is different.  The fed’s actions affect the nation as a whole, and that it might be distorting the Irvine market is not reason to let the rest of the country overcorrect.  We looked at a new construction home around this time last year by a builder that built a nearly identical home in a nearly identical neighborhood in 2003.  If you take 3%/yr inflation over that period, the sales prices of $485k in 2003 is almost identical to the $575k price in 2009.  Another very similar new home sold recently for the same $/sqft.  Prices in many areas have not seen the dramatic shifts that the bubble areas have seen.

The fed doesn’t care about ever selling their MBS’s.  They can just hold them till people refi & the principal is returned

It’s the debt impact on future generations that infuriates me. It’s a cash grab by Baby Boomers and loan owners - pure and simple. They’d rather see their children and grandchildren live in a cardboard box than consider losing any of their pulled forward “wealth.”

If the men and women of WW2 are the “greatest generation” then I would argue the Baby Boomers are the “most selfish generation,” leaving their children worse off than they are for the first time in the history of this country.

Irvine Renter,

I have to question one statement from todays entry -

“of course, I don’t believe those properties will fall 40% more in value, and frankly, even if they did, I wouldn’t care because i bought them for their current cashflow not their resale value.”

I would think that a 20% drop, let alone a 40% hit would be devastating to your cash flow properties. Who, in their right minds would rent if the house next door could be bought for significantly less.  Hell, in Vegas you would be able to by a house working at In-N-Out.

Breaking news - Nov 05 2010, the Chosen One and Hellicopter at oval office:

The One: You promise me re-elected at 2012 when I re-nominated you, but ever since bailed out my ratings keep dropping.
Ben: I outlined a four year campaign plan two years ago, now just heating up.
The One: But economic goes nowhere since then.
Ben: In order aggregated monetary policy affect mutual signified efficaciously we need to bring down the economic deeper so we can have more stimulus
The One: But does it means more debt to next generation
Ben: People perceive revalue dollar will erase debt, and … remember 2012.
The One: But I just lost the midterm
Ben:  Now you know where to point your finger
The One: But hurry, what if my rating lower than un-employment rate.
Ben: if QE2 is not enough, QE3 and QE4 … Fed is not part of federal government.
The One: I got it. I will re- nominated you another 4 years. 

**************************************************
Ben: Hi Alan, this is for us, I cover your dumb A$$ for free, and I will get my 20 years too.

There is no risk in Real Estate !?!.
Especially if your looking for investors.

My worry with all of this ‘money printing’ and intervention that we get the exact opposite of what the Fed is trying to do… that is, we get huge commodity inflation - gas, food, energy and stagnant wages.  This means more and more money being spent just to live and even harder to stretch for big housing debt payments. 

I doubt these Fed actions do anything productive and are more likely to hurt people and housing. 

My .02

BD

“The Fed is creating consumers, not producers” ~ Peter Schiff

I think it’s clear the Keynesians have it wrong!  The only answer is to downsize the scope of the govt/FED, get them out of the equity markets, out of the real estate market, out of our pockets.

Take this morale hazard out of the markets!

IR wrote:
“This is also theft from savers. The free market would place a value on stored financial reserves, but the Federal Reserve usurps the free market and diverts the return on savings away from savers to the member banks. The inflation that comes at the end of the cycle is a second form of theft from savers we will see when interest rates go back up.”
——————————————

II completely identify with this being a saver who saved money for at least 20% down payment but did not buy due to job insecurity (only to be laid off as feared), and my full-fledged down payment is “earning” me about $20 per month. When inflation occurs, I will eat more shit.

Even Bill Gross the bond guru said printing money and Fed buying debt (thus creating artificial demand for bonds at ridiculously high prices (i.e. low interest rates) will kill the bond market because rates will have nowhere to go but up, and eventually driving bond prices down.

IR - Aren’t you glad there are so many experts here who can point out your mistakes?