Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Hah, no. QE bubble will result in either housing crash or mad mad inflation which deflates housing prices in nominal terms. Honestly, I expect the inflation.

Welcome back tin-foil hat wearing, QE man.

So, inflation will deflate housing prices in nominal terms (that's a quote!)? It doesn't take a professional economist (despite me being one) to tell you that you don't understand the words you're using.

As a professional economist, you foresaw the housing bubble in 2005/2006? Because I did, long before it was cool.

I am not as sure about this one, honestly. But things are definitely funny and all this intervention is... troubling.

No need for name calling, though as a professional economist who seems to take this discussion personally, do you work at the Fed? You can tell Yellen she has a fan here! I think she is going to really shakes things up to get jobs growing again.

Not personal at all. I was just trying to emphasize that the statement "inflation causes nominal prices to decline" made no sense.

No, I didn't even remotely see the crisis coming. To be fair, I wasn't looking, but I'm not naive enough to think that I would have spotted it even if I was looking.

I think it's odd that you think QE propped up the value of housing but not the value of other assets. That may be correct, but you're walking a fine line in order to get to this conclusion.

Finally, again, the taper should curtail the inflationary headwinds. You seem to believe that the taper will exacerbate inflationary headwinds. Regardless, the real fear, unless you're in a developing market (or invested heavily therein) is deflation. The Fed would like to see more inflation than we currently see. The fact that inflation remains so slow despite so much stimulus suggests there remains significant weakness in the economy. That's a real concern.

My guess is that when all the dust settles, perhaps by 2020, we'll recognize this period as akin to the Great Depression. We may well marvel that things never got worse than they did.

Thanks for your thoughtful response.

Oh, I definitely feel QE is inflating all assets; but most of us mere mortals don't own enough stock or commodities that it would matter. Even for folks with large 401ks most of them should be in conservative funds now and haven't really enjoyed any benefit from QE.

Yes, I agree, taper should curtail inflationary headwinds, and if Fed does nothing then I expect housing prices (and assets) to decline. My expectation for inflation to run amuk is based on assumption the Fed will take further different action to prevent housing prices from falling in nominal prices (though they may fall in real dollars if inflation is high -- I really think I have this right here, maybe spell out where I am explaining this wrong). Ie, your houses never drops below $1M, but bread costs $500 and you make $200k a year as school teacher. Prices don't drop in nominal terms, but the real value has fallen considerably. That is the outcome that I think the Fed is trying to engineer, since when headline numbers for house prices fall, people freakout.

Totally agree that this current period is really really bad. Deflation is a real risk, and the economy is generally really too weak considering all the stimulus that has been thrown out it. I am hoping Yellen takes a different tack, such as only offering to buy bonds issued by municipalities tied to job program type projects with specific hiring requirements (kind of like a Fed administered New Deal work program). Honestly, I'm not sure if they are allowed to make those kind of purchases, but since they are buying all sorts weird mortgage products I suspect some path could be found. Yellen is fairly daring from what I can tell.

As for the total lack of inventory, I think lack of job mobility and little retirement savings is big reason, but really feel it is all a supply problem. There is no new buyers, and I really am curious what jobs are growing here in DC? The budget that passed didn't really change anything, legislature is deadlocked, defense is cutting back, so what am I missing?

Anonymous wrote:

Anonymous wrote:

Hah, no. QE bubble will result in either housing crash or mad mad inflation which deflates housing prices in nominal terms. Honestly, I expect the inflation.

Welcome back tin-foil hat wearing, QE man.

So, inflation will deflate housing prices in nominal terms (that's a quote!)? It doesn't take a professional economist (despite me being one) to tell you that you don't understand the words you're using.

As a professional economist, you foresaw the housing bubble in 2005/2006? Because I did, long before it was cool.

I am not as sure about this one, honestly. But things are definitely funny and all this intervention is... troubling.

No need for name calling, though as a professional economist who seems to take this discussion personally, do you work at the Fed? You can tell Yellen she has a fan here! I think she is going to really shakes things up to get jobs growing again.

Not personal at all. I was just trying to emphasize that the statement "inflation causes nominal prices to decline" made no sense.

No, I didn't even remotely see the crisis coming. To be fair, I wasn't looking, but I'm not naive enough to think that I would have spotted it even if I was looking.

I think it's odd that you think QE propped up the value of housing but not the value of other assets. That may be correct, but you're walking a fine line in order to get to this conclusion.

Finally, again, the taper should curtail the inflationary headwinds. You seem to believe that the taper will exacerbate inflationary headwinds. Regardless, the real fear, unless you're in a developing market (or invested heavily therein) is deflation. The Fed would like to see more inflation than we currently see. The fact that inflation remains so slow despite so much stimulus suggests there remains significant weakness in the economy. That's a real concern.

My guess is that when all the dust settles, perhaps by 2020, we'll recognize this period as akin to the Great Depression. We may well marvel that things never got worse than they did.

+1 on Janet Her mandate is job growth.

Anonymous wrote:

Hah, no. QE bubble will result in either housing crash or mad mad inflation which deflates housing prices in nominal terms. Honestly, I expect the inflation.

Welcome back tin-foil hat wearing, QE man.

So, inflation will deflate housing prices in nominal terms (that's a quote!)? It doesn't take a professional economist (despite me being one) to tell you that you don't understand the words you're using.

As a professional economist, you foresaw the housing bubble in 2005/2006? Because I did, long before it was cool.

I am not as sure about this one, honestly. But things are definitely funny and all this intervention is... troubling.

No need for name calling, though as a professional economist who seems to take this discussion personally, do you work at the Fed? You can tell Yellen she has a fan here! I think she is going to really shakes things up to get jobs growing again.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Hah, no. QE bubble will result in either housing crash or mad mad inflation which deflates housing prices in nominal terms. Honestly, I expect the inflation.

Welcome back tin-foil hat wearing, QE man.

So, inflation will deflate housing prices in nominal terms (that's a quote!)? It doesn't take a professional economist (despite me being one) to tell you that you don't understand the words you're using.

New Poster - I don't understand the words he's using either. What does it mean?

It's nonsense. Inflation means increasing nominal prices. (The "nominal" in that expression is due to the fact that a dollar today is worth a different amount than a dollar in 1980. Inflation means that a dollar tomorrow is worth less than a dollar today. It can buy less because prices have gone up. If all prices double, tomorrow's dollar is worth half of today's dollar.)

He says inflation will deflate housing prices in nominal terms. Assuming deflate==decrease, this makes no sense. Inflation raises the nominal prices of homes.

True, houses will decrease in real terms as well. My point is that folks will have less and less disposable income because of rampant inflation which will push down housing prices no longer supported by the asset bubble.

Anonymous wrote:Continuing the lecture, the QE in his post refers to the Fed's quantitative easing program. Basically, the Fed has been buying a whole lot of financial instruments. This increase in demand keeps their prices up.

The Fed now has a giant balance sheet that it needs to unwind (sell off, slowly). This is called tapering. At present, the Fed is still buying assets each month, just less than it had been doing. This is tapering.

The risk of continuing to prop up demand for assets is that it keeps their price high. This can cause inflation. So, I THINK, the poster means to say that the prolonged QE program (not the tapering of said program) has the potential to unleash lots of inflation. The Fed is acutely aware of this and is monitoring it closely, I assure you.

Glad someone is paying attention. PP here, I expect inflation in everything except housing prices, which have been supported by the asset bubble caused by QE.

Why is this so hard to understand? There has been massive stimulus from the Fed unlike anything in history? Why do we not expect problems from such intervention? Housing is unsustainably expensive now, nationwide, and removing the low interest rates only exacerbates the problem.

Look at the stats, there are fewer and fewer first time home buyers every month. We are all just buying and selling houses among are selves and with hot money investors who will leave the party as soon as rates rise. I would love to wrong, as we plan to sell in a few years and downsize. I'm just telling the folks looking for inventory why the market is so screwed up; too much intervention, and if you buy you better buy for long term and be very liquid.

I am still really curious about what jobs are growing in our region? The bubble is a national problem, and I'm sure a lot of real estate shills will chime in that real estate is local (whatever; if job market improves elsewhere and out-migration increases, you know *that* national trend will affect prices here. Its not like we're on a beach here or anything), but supporting our local economy I am curious where folks see growth? I think we are just treading water.

Continuing the lecture, the QE in his post refers to the Fed's quantitative easing program. Basically, the Fed has been buying a whole lot of financial instruments. This increase in demand keeps their prices up.

The Fed now has a giant balance sheet that it needs to unwind (sell off, slowly). This is called tapering. At present, the Fed is still buying assets each month, just less than it had been doing. This is tapering.

The risk of continuing to prop up demand for assets is that it keeps their price high. This can cause inflation. So, I THINK, the poster means to say that the prolonged QE program (not the tapering of said program) has the potential to unleash lots of inflation. The Fed is acutely aware of this and is monitoring it closely, I assure you.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

No, that's not it, though I'm sure there are a few examples to the contrary.

It's simply economics. Demand is greater than supply. This causes prices to rise.

There are several reasons why demand is outstripping supply in DC, and they've mostly been mentioned already: demand is high because there is serious job and income growth in this region, especially when viewed relative to other regions; supply is low because traffic makes distance extremely relevant and there are immutable constraints on the amount of houses close-in; supply is low because the rate lock-in effect makes the prospect of moving to another home less attractive; supply is low because retirement accounts took a huge hit and caused a delay in retirement (I'm not sure if this is true; it's an empirical question).

So, we have demand>supply. Looking at the reasons stated above, which of these do you expect to change going-forward? The cessation of sustained job and income growth in the region? No. Traffic suffocating homes with longer commutes? Doubtful, though self-driving cars may change this landscape (of course, not within a decade). Interest rates reversing so that it's more attractive to move? No chance, period. Retirement accounts recovering? Yeah, that should happen, but the effect won't be large. (Again, I question whether this is actually relevant in DC at all; I honestly don't have a clue.)

All-in-all, I foresee little reason to think we won't have a continued disequilibrium in which demand>supply for years to come. In an odd way, I'm not more bullish on DC housing than I was before writing those lines. I'd enjoy hearing from others on this.

People keep talking about the job market here. What jobs are growing?

1) Attorneys: DCUM is full of stories for firms folding, and warning about how there has been a shift and discouraging future lawyers (as well as oversupply from the many many law schools)

2) Lobbying: Congress is basically deadlocked and lobbying has been down since recession. http://www.marketplace.org/topics/economy/new-business-lobbying

3) Tech: DOD budget is down, what 1/2 trillion for next 10 years? So defense contractor cuts. Living social is a flame out. Maybe some big data/nimble tech analytics are flourishing, but only b/c they are cheaper and leaner than the beltway bandits and Big-5 Defense contractors from whom they are taking business.

Where is this job growth?? I do concede we don't see massive layoffs and a fairly stable job market, so hence we don't see people selling b/c they have to nor waves of foreclosure.

This is a total supply-side induced bubble. Short supply is a large part b/c people were holding out for prices to go back to bubble levels (even folks who bought decades have this delusional thought that they lost money b/c it was at one point worth $XXXX, so are waiting for prices to return that point and beyond). Prices are just at bubble levels now, but I think the run-up was so fast, folks are getting greedy and sitting on their house, because "real estate never goes down".

This locked up market will persist for a long time, and end in tears I'm afraid.

1, 2, 3 are yesterday's news and have been resolved after the government shutdown which made both sides look bad.

Tears meanings they missed out on the low interest rates and low prices.

Hah, no. QE bubble will result in either housing crash or mad mad inflation which deflates housing prices in nominal terms. Honestly, I expect the inflation.

Wouldn't inflation mean the price of everything goes up?

Anonymous wrote:

Anonymous wrote:

Hah, no. QE bubble will result in either housing crash or mad mad inflation which deflates housing prices in nominal terms. Honestly, I expect the inflation.

Welcome back tin-foil hat wearing, QE man.

So, inflation will deflate housing prices in nominal terms (that's a quote!)? It doesn't take a professional economist (despite me being one) to tell you that you don't understand the words you're using.

New Poster - I don't understand the words he's using either. What does it mean?

It's nonsense. Inflation means increasing nominal prices. (The "nominal" in that expression is due to the fact that a dollar today is worth a different amount than a dollar in 1980. Inflation means that a dollar tomorrow is worth less than a dollar today. It can buy less because prices have gone up. If all prices double, tomorrow's dollar is worth half of today's dollar.)

He says inflation will deflate housing prices in nominal terms. Assuming deflate==decrease, this makes no sense. Inflation raises the nominal prices of homes.

Anonymous wrote:

Hah, no. QE bubble will result in either housing crash or mad mad inflation which deflates housing prices in nominal terms. Honestly, I expect the inflation.

Welcome back tin-foil hat wearing, QE man.

So, inflation will deflate housing prices in nominal terms (that's a quote!)? It doesn't take a professional economist (despite me being one) to tell you that you don't understand the words you're using.

New Poster - I don't understand the words he's using either. What does it mean?

Hah, no. QE bubble will result in either housing crash or mad mad inflation which deflates housing prices in nominal terms. Honestly, I expect the inflation.

Welcome back tin-foil hat wearing, QE man.

So, inflation will deflate housing prices in nominal terms (that's a quote!)? It doesn't take a professional economist (despite me being one) to tell you that you don't understand the words you're using.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

No, that's not it, though I'm sure there are a few examples to the contrary.

It's simply economics. Demand is greater than supply. This causes prices to rise.

There are several reasons why demand is outstripping supply in DC, and they've mostly been mentioned already: demand is high because there is serious job and income growth in this region, especially when viewed relative to other regions; supply is low because traffic makes distance extremely relevant and there are immutable constraints on the amount of houses close-in; supply is low because the rate lock-in effect makes the prospect of moving to another home less attractive; supply is low because retirement accounts took a huge hit and caused a delay in retirement (I'm not sure if this is true; it's an empirical question).

So, we have demand>supply. Looking at the reasons stated above, which of these do you expect to change going-forward? The cessation of sustained job and income growth in the region? No. Traffic suffocating homes with longer commutes? Doubtful, though self-driving cars may change this landscape (of course, not within a decade). Interest rates reversing so that it's more attractive to move? No chance, period. Retirement accounts recovering? Yeah, that should happen, but the effect won't be large. (Again, I question whether this is actually relevant in DC at all; I honestly don't have a clue.)

All-in-all, I foresee little reason to think we won't have a continued disequilibrium in which demand>supply for years to come. In an odd way, I'm not more bullish on DC housing than I was before writing those lines. I'd enjoy hearing from others on this.

People keep talking about the job market here. What jobs are growing?

1) Attorneys: DCUM is full of stories for firms folding, and warning about how there has been a shift and discouraging future lawyers (as well as oversupply from the many many law schools)

2) Lobbying: Congress is basically deadlocked and lobbying has been down since recession. http://www.marketplace.org/topics/economy/new-business-lobbying

3) Tech: DOD budget is down, what 1/2 trillion for next 10 years? So defense contractor cuts. Living social is a flame out. Maybe some big data/nimble tech analytics are flourishing, but only b/c they are cheaper and leaner than the beltway bandits and Big-5 Defense contractors from whom they are taking business.

Where is this job growth?? I do concede we don't see massive layoffs and a fairly stable job market, so hence we don't see people selling b/c they have to nor waves of foreclosure.

This is a total supply-side induced bubble. Short supply is a large part b/c people were holding out for prices to go back to bubble levels (even folks who bought decades have this delusional thought that they lost money b/c it was at one point worth $XXXX, so are waiting for prices to return that point and beyond). Prices are just at bubble levels now, but I think the run-up was so fast, folks are getting greedy and sitting on their house, because "real estate never goes down".

This locked up market will persist for a long time, and end in tears I'm afraid.

1, 2, 3 are yesterday's news and have been resolved after the government shutdown which made both sides look bad.

Tears meanings they missed out on the low interest rates and low prices.

Hah, no. QE bubble will result in either housing crash or mad mad inflation which deflates housing prices in nominal terms. Honestly, I expect the inflation.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

No, that's not it, though I'm sure there are a few examples to the contrary.

It's simply economics. Demand is greater than supply. This causes prices to rise.

There are several reasons why demand is outstripping supply in DC, and they've mostly been mentioned already: demand is high because there is serious job and income growth in this region, especially when viewed relative to other regions; supply is low because traffic makes distance extremely relevant and there are immutable constraints on the amount of houses close-in; supply is low because the rate lock-in effect makes the prospect of moving to another home less attractive; supply is low because retirement accounts took a huge hit and caused a delay in retirement (I'm not sure if this is true; it's an empirical question).

So, we have demand>supply. Looking at the reasons stated above, which of these do you expect to change going-forward? The cessation of sustained job and income growth in the region? No. Traffic suffocating homes with longer commutes? Doubtful, though self-driving cars may change this landscape (of course, not within a decade). Interest rates reversing so that it's more attractive to move? No chance, period. Retirement accounts recovering? Yeah, that should happen, but the effect won't be large. (Again, I question whether this is actually relevant in DC at all; I honestly don't have a clue.)

All-in-all, I foresee little reason to think we won't have a continued disequilibrium in which demand>supply for years to come. In an odd way, I'm not more bullish on DC housing than I was before writing those lines. I'd enjoy hearing from others on this.

People keep talking about the job market here. What jobs are growing?

1) Attorneys: DCUM is full of stories for firms folding, and warning about how there has been a shift and discouraging future lawyers (as well as oversupply from the many many law schools)

2) Lobbying: Congress is basically deadlocked and lobbying has been down since recession. http://www.marketplace.org/topics/economy/new-business-lobbying

3) Tech: DOD budget is down, what 1/2 trillion for next 10 years? So defense contractor cuts. Living social is a flame out. Maybe some big data/nimble tech analytics are flourishing, but only b/c they are cheaper and leaner than the beltway bandits and Big-5 Defense contractors from whom they are taking business.

Where is this job growth?? I do concede we don't see massive layoffs and a fairly stable job market, so hence we don't see people selling b/c they have to nor waves of foreclosure.

This is a total supply-side induced bubble. Short supply is a large part b/c people were holding out for prices to go back to bubble levels (even folks who bought decades have this delusional thought that they lost money b/c it was at one point worth $XXXX, so are waiting for prices to return that point and beyond). Prices are just at bubble levels now, but I think the run-up was so fast, folks are getting greedy and sitting on their house, because "real estate never goes down".

This locked up market will persist for a long time, and end in tears I'm afraid.

1, 2, 3 are yesterday's news and have been resolved after the government shutdown which made both sides look bad.

1) So attorney's are hiring again? 2) Lobbying -- this article is from yesterday... 3) DOD is still cutting it's budget (sequester has been stopped, but they already had 500 billion in cuts lined up).

But no question, this is top of the heap in job markets: in the land of the blind, the one-eyed man is king.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

No, that's not it, though I'm sure there are a few examples to the contrary.

It's simply economics. Demand is greater than supply. This causes prices to rise.

There are several reasons why demand is outstripping supply in DC, and they've mostly been mentioned already: demand is high because there is serious job and income growth in this region, especially when viewed relative to other regions; supply is low because traffic makes distance extremely relevant and there are immutable constraints on the amount of houses close-in; supply is low because the rate lock-in effect makes the prospect of moving to another home less attractive; supply is low because retirement accounts took a huge hit and caused a delay in retirement (I'm not sure if this is true; it's an empirical question).

So, we have demand>supply. Looking at the reasons stated above, which of these do you expect to change going-forward? The cessation of sustained job and income growth in the region? No. Traffic suffocating homes with longer commutes? Doubtful, though self-driving cars may change this landscape (of course, not within a decade). Interest rates reversing so that it's more attractive to move? No chance, period. Retirement accounts recovering? Yeah, that should happen, but the effect won't be large. (Again, I question whether this is actually relevant in DC at all; I honestly don't have a clue.)

All-in-all, I foresee little reason to think we won't have a continued disequilibrium in which demand>supply for years to come. In an odd way, I'm not more bullish on DC housing than I was before writing those lines. I'd enjoy hearing from others on this.

People keep talking about the job market here. What jobs are growing?

1) Attorneys: DCUM is full of stories for firms folding, and warning about how there has been a shift and discouraging future lawyers (as well as oversupply from the many many law schools)

2) Lobbying: Congress is basically deadlocked and lobbying has been down since recession. http://www.marketplace.org/topics/economy/new-business-lobbying

3) Tech: DOD budget is down, what 1/2 trillion for next 10 years? So defense contractor cuts. Living social is a flame out. Maybe some big data/nimble tech analytics are flourishing, but only b/c they are cheaper and leaner than the beltway bandits and Big-5 Defense contractors from whom they are taking business.

Where is this job growth?? I do concede we don't see massive layoffs and a fairly stable job market, so hence we don't see people selling b/c they have to nor waves of foreclosure.

This is a total supply-side induced bubble. Short supply is a large part b/c people were holding out for prices to go back to bubble levels (even folks who bought decades have this delusional thought that they lost money b/c it was at one point worth $XXXX, so are waiting for prices to return that point and beyond). Prices are just at bubble levels now, but I think the run-up was so fast, folks are getting greedy and sitting on their house, because "real estate never goes down".

This locked up market will persist for a long time, and end in tears I'm afraid.

1, 2, 3 are yesterday's news and have been resolved after the government shutdown which made both sides look bad.

Tears meanings they missed out on the low interest rates and low prices.