Friday, October 10, 2008

Two Year Anniversary

This month will mark the beginning of our third year as renters in the Sacramento area. I still count my blessings that we didn't buy immediately after moving back to CA.

These are very somber times. According to yesterday's WSJ, California led the way into the recession. With all the job losses my friends and family have experienced, I am relieved to hear it's considered a recession around here, cause I would hate to think what things would look like if we hadn't hit recession territory yet.

Even though some bubble bloggers take joy in the aftermath, I am certainly not one of them. Although I must admit, its nice to know I didn't spend 60k on a top B-school education, only to find out everything I learned about fundamentals was rubbish.

But in every other sense, its absolutely no fun being right. I knew there was a housing bubble, and that stocks had gotten a bit out of control, not realizing the extent of the trouble we were in,. However I had no idea, when I wrote about it last October that we would be in such dire straits a year later.

Unfortunately, I am not seeing many factors kick in that will bring an end to the troubles we are experiencing. By my calculation, using today's Zillow data, our starter home in the D.C. area has at least another 10% to fall, in order to reach a somewhat reasonable level.

I guess the only bright spot right now is that oil and other commodities have retreated substantially. (I probably obsess over oil more than the next person, as my industry, aviation, lives and dies by the price of oil).

Rant on/
Of course this couldn't happen at a worse time. If other government agencies are like the one I work with, so much forward progress is on hold waiting for the next administration. With the exception of the Treasury Department, the rest of the federal government seems to be in a 9 month paralysis. No one wants to make a decision or take action. From my perspective, this is incredibly frustrating, as we are wasting precious time.
/Rant off

10 comments:

Patient Renter said...

some bubble bloggers take joy in the aftermath

A few might. For the most part though, I think many take joy in being vindicated, but certainly not in what that vindication means for the economy.

Deflationary Jane said...

well put PR

Ps. Looks like I'll be back in Sac sooner then I had planned and possibly staying. We'll see.

PeonInChief said...

DJ-

What??!!

alba said...

See if you can hold out until you become First Time Buyers again. I've read where the new home builders are lobbying for a $15K (real) tax credit.

People can say what they want about how they predicted this mess, and feel vindicated. But we're not out of this situation, as a nation, and across the world.

Anybody could have predicted a downturn in the housing cycle. And nobody could have really predicted how the shadow banking industry has placed everybody in jeopardy.

I don't know about you, but I keep looking at my wife and children with joy, and thank God. Up or down $, has less to do with what really matters.

It was a paralyzing week, trying to keep up with this disaster.

Buying Time said...

OMG DJ, drop a bomb on us for heavens sake! I certainly hope its for positive reasons (promotion etc.).

Honestly Alba, I am frightened for what's to come. I worry about my friends and relatives, and how we will all fare through this mess.

sacramentia said...

Here is an article about how during bad economic time the opportunity cost of not working decreases and makes all the things that alba talks about less expensive to do.

http://www.minyanville.com/articles/debt-deflation-crisis-simulacra/index/a/19453


And DJ, I think you'd fit in great here in EDH!

Deflationary Jane said...

LOLOL Ummm EDH is my version of the 6th plane of Hell >; )

BT, I'll email you

PeonInChief said...

Oh, BT, George Soros pointed out much the same perspective of your "rant on" last night on Bill Moyers show last night--that people are fiddling while Rome burns and that it's the next administration that will need to set policy before the inauguration.

Also if you get a chance, watch the McLaughlin Group. It's so fun to watch free marketeers advocating market interventions a la Roosevelt.

Patient Renter said...

I caught Soros on Bill Moyers last night as well. I didn't at all like how he advocated for "putting a floor" under housing.

As independent housing economists have pointed out, prices ultimately fall because of unafordability. Attempting to fix prices at an unaffordable level is simply foolish. Soros might be a good investor, but he would be well served to read up on the history of what happens when you attempt to fix prices - you fail.

We'll all be better off once our leaders and prominent figures finally come to grips with the reality of market economics - you cannot force prices to be what you want them to be.

Cmyst said...

But you can't blame them for wanting to try.
Many of us have pointed out that the only thing fueling the "growth" of the US economy (and ultimately, the world economy) for the last several years has been home equity and the financial market.
Not wages.
Not manufacturing.

No wonder they want to stop house price depreciation.
Of course, it won't work. People will buy houses that they can afford, when the credit markets decide to start lending to them. The politicians and the wealthy investor class have no clue about this debacle, in my opinion. They refuse to acknowledge the large percentage of "investor" properties that are involved, and even among those living in the homes they bought, the "investor" mentality that leads them to walk away when the house is no longer a piggybank for them.

This is going to get uglier and uglier. Hell hath no fury like people forced to live within their means after years of excess. And it isn't going to change until we base our economic growth indicators on something other than shopping.