Housing bubble? What does W.Buffet say?

[Playmaker]

Buffett is NOT always right. Anyone who has followed him and read his shareholder letters knows that he ALWAYS takes an extremely negative view, and then proceeds to operate business as usual. It's just his way, and I'd be more worried if he was ever optimistic about a macroeconomic event.

Also, the housing market is localized and backed by tangible assets. This isn't the tech bubble where stock prices were being propped up by intangibles and enthusiasm. That's not to say certain markets won't go flat in the coming years, but it's a completely different situation and anything resembling a "crash" or a "bubble" is not going to happen.

 

[JS80]

Originally posted by: Marlin1975

Originally posted by: libs0n

Originally posted by: iversonyin
Buffet is usually right, but he was wrong on his dollar bet. So the man isn't god afterward.

I was under the impression that the dollar has continued to decline in value. I'm not sure of the exact numbers, but I overheard lately that it has declined 50% from it's peak a few years ago against the Canadian dollar. Anyone with more accurate numbers?

edit: google news turned up a recent article that says that in this year alone, the dollar has declined by 7% against the euro. Of course, I'm not familiar with the details of Buffet's dollar play, so perhaps you are right when you say it backfired, but on the surface it seems that betting on the depreciation of the american dollar was a good bet.

Yea did he not make a good amount of money? I thought the dollar was down from what I have seen.

Buffet has lost billions since betting against the dollar.

 

[JS80]

You guys are delusional if you think most homebuyers are ~$65k income with 1 year ARMs and overstretched. I've been hearing the housing market bubble story for the last 3 years. And guess what? Prices have been going up. When it comes down to it, it's simple supply and demand; supply of real estate is (relatively) fixed, while demand increases.

For all you that are saying there will be forclosures and prices will crash, let me tell you the worst scenario for the housing market. So the chump who bought a $500k house on a 5 year arm in 2002 at 3-4% will see his payment go up by 50%. By now that $500k house is worth $1 million, so he puts it on the market a few months before his new payments are due. But let's say everyone and his dog is in the same situation and decides to sell their $500k house which is now worth $1 million. OMG THE HOUSING BUBBLE HERE IT IS IT'S GOING TO POP IT's GOING DOWN 20%!!!!!! OK......20% drop is $800k, the a$$hole still made 60% plus he doesn't pay any taxes on the gain.

There may or may not be a housing bubble, but the only way prices will fall is if people are willing to sell it for a lower price. A 20% drop in housing prices isn't going to cause the sky to fall, but even then don't be hopefuly you'll be able to get in at that price, because even then it's 60% higher than the beginning of the "housing bubble" hype.

But most of all, there are so many cheapos like you who have been waiting for the last 4 years for the bubble to pop it will keep demand for housing (and consequently prices) high.

 

[dmcowen674]

Originally posted by: JS80
Buffet has lost billions since betting against the dollar.

You have no clue to what you are talking about. :roll:

 

[JS80]

Originally posted by: dmcowen674

Originally posted by: JS80
Buffet has lost billions since betting against the dollar.

You have no clue to what you are talking about. :roll:

OK I exaggerated he lost $900 million. He made some back in the last 2 weeks.

And yea I have no clue to what I'm talking about because I don't have 5 years experience trading the FOREX markets :roll:

 

[Rage187]

We dropped $170,000 yesterday for 1675sqft, new construction though w/ a ton of options

 

[dmcowen674]

Originally posted by: JS80

Originally posted by: dmcowen674

Originally posted by: JS80
Buffet has lost billions since betting against the dollar.

You have no clue to what you are talking about. :roll:

OK I exaggerated he lost $900 million. He made some back in the last 2 weeks.

And yea I have no clue to what I'm talking about because I don't have 5 years experience trading the FOREX markets :roll:

Oh come on, $900 Million to him is like 9 cents, be real.

 

[JS80]

Originally posted by: dmcowen674

Originally posted by: JS80

Originally posted by: dmcowen674

Originally posted by: JS80
Buffet has lost billions since betting against the dollar.

You have no clue to what you are talking about. :roll:

OK I exaggerated he lost $900 million. He made some back in the last 2 weeks.

And yea I have no clue to what I'm talking about because I don't have 5 years experience trading the FOREX markets :roll:

Oh come on, $900 Million to him is like 9 cents, be real.

What was your point in saying I had no clue what I'm talking about?

 

[JS80]

I hate people like you who assume everyone else is an ignorant buffoon. But what happens when you come across someone who knows his shvt and he calls you out?

You're just like the fvckhead IT guy at my company who assumes everyone's a fvcking idiot.

 

[dmcowen674]

Originally posted by: JS80

Originally posted by: dmcowen674

Originally posted by: JS80

Originally posted by: dmcowen674

Originally posted by: JS80
Buffet has lost billions since betting against the dollar.

You have no clue to what you are talking about. :roll:

OK I exaggerated he lost $900 million. He made some back in the last 2 weeks.

And yea I have no clue to what I'm talking about because I don't have 5 years experience trading the FOREX markets :roll:

Oh come on, $900 Million to him is like 9 cents, be real.

What was your point in saying I had no clue what I'm talking about?

You acted like the $900 million was a big deal to him and you.

If you deal with multi billion dollar funds on a daily basis then it should be like 9 cents to you too.

 

[JS80]

Originally posted by: dmcowen674

Originally posted by: JS80

Originally posted by: dmcowen674

Originally posted by: JS80

Originally posted by: dmcowen674

Originally posted by: JS80
Buffet has lost billions since betting against the dollar.

You have no clue to what you are talking about. :roll:

OK I exaggerated he lost $900 million. He made some back in the last 2 weeks.

And yea I have no clue to what I'm talking about because I don't have 5 years experience trading the FOREX markets :roll:

Oh come on, $900 Million to him is like 9 cents, be real.

What was your point in saying I had no clue what I'm talking about?

You acted like the $900 million was a big deal to him and you.

If you deal with multi billion dollar funds on a daily basis then it should be like 9 cents to you too.

I was directly answering Marlin's Q "Yea did he not make a good amount of money?"

The answer his no, he lost about a billion dollars. That's about 10% of Berkshire's net income. I would say it's a big deal, knowing how much of a cheap ass Buffett is.

 

[Mardeth]

Originally posted by: JS80
OMG THE HOUSING BUBBLE HERE IT IS IT'S GOING TO POP IT's GOING DOWN 20%!!!!!!

It is true that the people buying cheap would be fine but what about those that bought in the past 3 years or so? With a 20% drop millions would have negative equity. America is also very vunerable because of the attitude with debt. Man, 20% drop would kill the economy... But Im sure it wont come to that. As many have said, if the prices drop, theyll buy. I believe theres enough wealth to hold up the market. The market will cool down maybe drop some (5%?) alot of people might lose their home but itll be fine for most of us...

 

[mayonnaise]

Dollar is gonna tank tank tank, it's been tanking pretty good for the past couple of weeks already. In places like Russia, there's a lot of talk about switching to EUR, however many companies that are operating on USD right now will be taking a loss so it's not such a great idea in their view. If such a movement does happen though, the USD is doomed. I'm expecting to see 1.3000 EUR/USD in the coming month or two, especially with the ECB hinting at rate increases. Last friday's job numbers werent that bad but the dollar still took a pretty substantial loss.

JS80, if you dont mind me asking, are you working for a company exclusively or doing private trading as well?

 

[ntdz]

Originally posted by: her209
Yeah, but that's like me saying we'll be seeing another recession followed by a boom in the near future.

Exactly, predicting a slowdown is so...predictable.

 

[JS80]

Originally posted by: mayonnaise
Dollar is gonna tank tank tank, it's been tanking pretty good for the past couple of weeks already. In places like Russia, there's a lot of talk about switching to EUR, however many companies that are operating on USD right now will be taking a loss so it's not such a great idea in their view. If such a movement does happen though, the USD is doomed. I'm expecting to see 1.3000 EUR/USD in the coming month or two, especially with the ECB hinting at rate increases. Last friday's job numbers werent that bad but the dollar still took a pretty substantial loss.

JS80, if you dont mine me asking, are you working for a company exclusively or doing private trading as well?

Private trading.

Weaker dollar will not significantly affect american individuals. A rise in euro means BMW and MBZ corporate will make less euros. A rise in Yen will mean Japanese electronics makers will make less yens. If anything it will increase demand for american goods.

 

[mayonnaise]

Originally posted by: JS80

Originally posted by: mayonnaise
Dollar is gonna tank tank tank, it's been tanking pretty good for the past couple of weeks already. In places like Russia, there's a lot of talk about switching to EUR, however many companies that are operating on USD right now will be taking a loss so it's not such a great idea in their view. If such a movement does happen though, the USD is doomed. I'm expecting to see 1.3000 EUR/USD in the coming month or two, especially with the ECB hinting at rate increases. Last friday's job numbers werent that bad but the dollar still took a pretty substantial loss.

JS80, if you dont mine me asking, are you working for a company exclusively or doing private trading as well?

Private trading.

Weaker dollar will not significantly affect american individuals. A rise in euro means BMW and MBZ corporate will make less euros. A rise in Yen will mean Japanese electronics makers will make less yens. If anything it will increase demand for american goods.

Agreed, after that a rebound is in order - question is how big and how soon.

Not sure if you wanna share or not, but how successful are you just out of interest?

I started sometime around Jan 06 and have been on this thing pretty hard. I started with pretty much nothing except a Micro/Macro economics courses under my belt, doubled almost 3 demo's so far though and opening a real account as soon as I find a broker I feel secure with. Mainly focusing on the EUR/USD and trying to dabble a bit with USD/JPY

 

[Kenazo]

Originally posted by: JS80
You guys are delusional if you think most homebuyers are ~$65k income with 1 year ARMs and overstretched. I've been hearing the housing market bubble story for the last 3 years. And guess what? Prices have been going up. When it comes down to it, it's simple supply and demand; supply of real estate is (relatively) fixed, while demand increases.

For all you that are saying there will be forclosures and prices will crash, let me tell you the worst scenario for the housing market. So the chump who bought a $500k house on a 5 year arm in 2002 at 3-4% will see his payment go up by 50%. By now that $500k house is worth $1 million, so he puts it on the market a few months before his new payments are due. But let's say everyone and his dog is in the same situation and decides to sell their $500k house which is now worth $1 million. OMG THE HOUSING BUBBLE HERE IT IS IT'S GOING TO POP IT's GOING DOWN 20%!!!!!! OK......20% drop is $800k, the a$$hole still made 60% plus he doesn't pay any taxes on the gain.

There may or may not be a housing bubble, but the only way prices will fall is if people are willing to sell it for a lower price. A 20% drop in housing prices isn't going to cause the sky to fall, but even then don't be hopefuly you'll be able to get in at that price, because even then it's 60% higher than the beginning of the "housing bubble" hype.

But most of all, there are so many cheapos like you who have been waiting for the last 4 years for the bubble to pop it will keep demand for housing (and consequently prices) high.

I hope you're right, but I don't think you are. Inflation in the US is going to be going through the roof with your declining dollar. The real gain is going to end up being substantially less.

The housing market Has gone through this all before. As interest rates go up, demand goes down and prices go down. I can't make my payments at 8%, neither can the majority of the potential purchasers. The $500k house bought in 2002 would have appreciated to $1M by 2006, but no purchaser will be able to pay that in 2007 with interest @ 8%, thus pushing the price back down. Now to make matters worse the person that bought the house in 2002 had an interest only mortgage, so he has no cash to take out of the mortgage and is forced to either rent his next place or buy some dump. Thus the low end of the market will become overinflated and the mid-high end stuff is all going to become drastically depressed.

The only ppl that win will be those that can afford to buy $500,000 houses @ 8%.

 

[dmcowen674]

Originally posted by: Kenazo
The only ppl that win will be those that can afford to buy $500,000 houses @ 8%.

That is supposedly most of the Country according to the ones that say the Economy is booming.

 

[JS80]

Originally posted by: mayonnaise

Originally posted by: JS80

Originally posted by: mayonnaise
Dollar is gonna tank tank tank, it's been tanking pretty good for the past couple of weeks already. In places like Russia, there's a lot of talk about switching to EUR, however many companies that are operating on USD right now will be taking a loss so it's not such a great idea in their view. If such a movement does happen though, the USD is doomed. I'm expecting to see 1.3000 EUR/USD in the coming month or two, especially with the ECB hinting at rate increases. Last friday's job numbers werent that bad but the dollar still took a pretty substantial loss.

JS80, if you dont mine me asking, are you working for a company exclusively or doing private trading as well?

Private trading.

Weaker dollar will not significantly affect american individuals. A rise in euro means BMW and MBZ corporate will make less euros. A rise in Yen will mean Japanese electronics makers will make less yens. If anything it will increase demand for american goods.

Agreed, after that a rebound is in order - question is how big and how soon.

Not sure if you wanna share or not, but how successful are you just out of interest?

I started sometime around Jan 06 and have been on this thing pretty hard. I started with pretty much nothing except a Micro/Macro economics courses under my belt, doubled almost 3 demo's so far though and opening a real account as soon as I find a broker I feel secure with. Mainly focusing on the EUR/USD and trying to dabble a bit with USD/JPY

I have to say FOREX is one of the hardest markets to trade in the short term. Because of the high leverage, you get effed in the ay with any small movement in one direction (or make bank). The hardest part is you HAVE to have a 24-7 watch on it to be a successful trader.

Personally I was down a bit overall until the euro hit ~$1.35 and I went all out and went short EUR/USD. I made all my money back in a month and came back over with a little profit. That was a almost a year ago. Nowadays I just follow it, not much trading. Mostly into oil and metals right now.

 

[JS80]

Originally posted by: Kenazo

Originally posted by: JS80
You guys are delusional if you think most homebuyers are ~$65k income with 1 year ARMs and overstretched. I've been hearing the housing market bubble story for the last 3 years. And guess what? Prices have been going up. When it comes down to it, it's simple supply and demand; supply of real estate is (relatively) fixed, while demand increases.

For all you that are saying there will be forclosures and prices will crash, let me tell you the worst scenario for the housing market. So the chump who bought a $500k house on a 5 year arm in 2002 at 3-4% will see his payment go up by 50%. By now that $500k house is worth $1 million, so he puts it on the market a few months before his new payments are due. But let's say everyone and his dog is in the same situation and decides to sell their $500k house which is now worth $1 million. OMG THE HOUSING BUBBLE HERE IT IS IT'S GOING TO POP IT's GOING DOWN 20%!!!!!! OK......20% drop is $800k, the a$$hole still made 60% plus he doesn't pay any taxes on the gain.

There may or may not be a housing bubble, but the only way prices will fall is if people are willing to sell it for a lower price. A 20% drop in housing prices isn't going to cause the sky to fall, but even then don't be hopefuly you'll be able to get in at that price, because even then it's 60% higher than the beginning of the "housing bubble" hype.

But most of all, there are so many cheapos like you who have been waiting for the last 4 years for the bubble to pop it will keep demand for housing (and consequently prices) high.

I hope you're right, but I don't think you are. Inflation in the US is going to be going through the roof with your declining dollar. The real gain is going to end up being substantially less.

The housing market Has gone through this all before. As interest rates go up, demand goes down and prices go down. I can't make my payments at 8%, neither can the majority of the potential purchasers. The $500k house bought in 2002 would have appreciated to $1M by 2006, but no purchaser will be able to pay that in 2007 with interest @ 8%, thus pushing the price back down. Now to make matters worse the person that bought the house in 2002 had an interest only mortgage, so he has no cash to take out of the mortgage and is forced to either rent his next place or buy some dump. Thus the low end of the market will become overinflated and the mid-high end stuff is all going to become drastically depressed.

The only ppl that win will be those that can afford to buy $500,000 houses @ 8%.

I don't think people realize there's a lot of cash out there waiting for this supposed bubble burst. Any decline in price will be short lived by the massive cash hoard that's waiting to pounce on this.

 

[Kenazo]

Originally posted by: dmcowen674

Originally posted by: Kenazo
The only ppl that win will be those that can afford to buy $500,000 houses @ 8%.

That is supposedly most of the Country according to the ones that say the Economy is booming.

Pssh. It is now. The ripple effect of an increased interest rate across the economy, coupled with a dollar worth squat will make for some pretty lean years for some folks, I'm thinking.

 

[Kenazo]

Originally posted by: JS80

Originally posted by: Kenazo

Originally posted by: JS80
You guys are delusional if you think most homebuyers are ~$65k income with 1 year ARMs and overstretched. I've been hearing the housing market bubble story for the last 3 years. And guess what? Prices have been going up. When it comes down to it, it's simple supply and demand; supply of real estate is (relatively) fixed, while demand increases.

For all you that are saying there will be forclosures and prices will crash, let me tell you the worst scenario for the housing market. So the chump who bought a $500k house on a 5 year arm in 2002 at 3-4% will see his payment go up by 50%. By now that $500k house is worth $1 million, so he puts it on the market a few months before his new payments are due. But let's say everyone and his dog is in the same situation and decides to sell their $500k house which is now worth $1 million. OMG THE HOUSING BUBBLE HERE IT IS IT'S GOING TO POP IT's GOING DOWN 20%!!!!!! OK......20% drop is $800k, the a$$hole still made 60% plus he doesn't pay any taxes on the gain.

There may or may not be a housing bubble, but the only way prices will fall is if people are willing to sell it for a lower price. A 20% drop in housing prices isn't going to cause the sky to fall, but even then don't be hopefuly you'll be able to get in at that price, because even then it's 60% higher than the beginning of the "housing bubble" hype.

But most of all, there are so many cheapos like you who have been waiting for the last 4 years for the bubble to pop it will keep demand for housing (and consequently prices) high.

I hope you're right, but I don't think you are. Inflation in the US is going to be going through the roof with your declining dollar. The real gain is going to end up being substantially less.

The housing market Has gone through this all before. As interest rates go up, demand goes down and prices go down. I can't make my payments at 8%, neither can the majority of the potential purchasers. The $500k house bought in 2002 would have appreciated to $1M by 2006, but no purchaser will be able to pay that in 2007 with interest @ 8%, thus pushing the price back down. Now to make matters worse the person that bought the house in 2002 had an interest only mortgage, so he has no cash to take out of the mortgage and is forced to either rent his next place or buy some dump. Thus the low end of the market will become overinflated and the mid-high end stuff is all going to become drastically depressed.

The only ppl that win will be those that can afford to buy $500,000 houses @ 8%.

I don't think people realize there's a lot of cash out there waiting for this supposed bubble burst. Any decline in price will be short lived by the massive cash hoard that's waiting to pounce on this.

But is that hoard going to be enough to keep the market stable? I doubt it. There just aren't enough people that are going to be able to afford it.

 

[libs0n]

Originally posted by: JS80

Weaker dollar will not significantly affect american individuals. A rise in euro means BMW and MBZ corporate will make less euros. A rise in Yen will mean Japanese electronics makers will make less yens. If anything it will increase demand for american goods.

Well, I can see one place where a falling dollar will hurt americans: oil. If I'm not mistaken, the import of oil accounts for the largest portion of the american trade deficit, and the one that's been increasing most in size and will continue to do so; trinkets from china et al being overhyped as the sole problem.

Although I understand that it is one of the factors contributing to the rise in the price of a barrel of crude, I've always been curious, but never done the legwork to find out, how much of the increase can be accounted for in the decline of the American dollar. Perhaps someone can point me in the right direction to find what the price of oil has been in euros, or ounces of gold, compared with dollars over the years; if not I'll ask in the next open thread at oil drum about it.

On Buffet, guy pulled out too soon. 7% decline in 5 months? Man, those printing presses must be churning them out.

 

[JS80]

Originally posted by: Kenazo

Originally posted by: JS80

Originally posted by: Kenazo

Originally posted by: JS80
You guys are delusional if you think most homebuyers are ~$65k income with 1 year ARMs and overstretched. I've been hearing the housing market bubble story for the last 3 years. And guess what? Prices have been going up. When it comes down to it, it's simple supply and demand; supply of real estate is (relatively) fixed, while demand increases.

For all you that are saying there will be forclosures and prices will crash, let me tell you the worst scenario for the housing market. So the chump who bought a $500k house on a 5 year arm in 2002 at 3-4% will see his payment go up by 50%. By now that $500k house is worth $1 million, so he puts it on the market a few months before his new payments are due. But let's say everyone and his dog is in the same situation and decides to sell their $500k house which is now worth $1 million. OMG THE HOUSING BUBBLE HERE IT IS IT'S GOING TO POP IT's GOING DOWN 20%!!!!!! OK......20% drop is $800k, the a$$hole still made 60% plus he doesn't pay any taxes on the gain.

There may or may not be a housing bubble, but the only way prices will fall is if people are willing to sell it for a lower price. A 20% drop in housing prices isn't going to cause the sky to fall, but even then don't be hopefuly you'll be able to get in at that price, because even then it's 60% higher than the beginning of the "housing bubble" hype.

But most of all, there are so many cheapos like you who have been waiting for the last 4 years for the bubble to pop it will keep demand for housing (and consequently prices) high.

I hope you're right, but I don't think you are. Inflation in the US is going to be going through the roof with your declining dollar. The real gain is going to end up being substantially less.

The housing market Has gone through this all before. As interest rates go up, demand goes down and prices go down. I can't make my payments at 8%, neither can the majority of the potential purchasers. The $500k house bought in 2002 would have appreciated to $1M by 2006, but no purchaser will be able to pay that in 2007 with interest @ 8%, thus pushing the price back down. Now to make matters worse the person that bought the house in 2002 had an interest only mortgage, so he has no cash to take out of the mortgage and is forced to either rent his next place or buy some dump. Thus the low end of the market will become overinflated and the mid-high end stuff is all going to become drastically depressed.

The only ppl that win will be those that can afford to buy $500,000 houses @ 8%.

I don't think people realize there's a lot of cash out there waiting for this supposed bubble burst. Any decline in price will be short lived by the massive cash hoard that's waiting to pounce on this.

But is that hoard going to be enough to keep the market stable? I doubt it. There just aren't enough people that are going to be able to afford it.

There are 2 sources of this money:
1. The earners out there who can barely not afford a place. They may be new grads, or newly weds with 2x income
2. Real Estate funds (almost like hedge funds...) who are predicting a bubble pop and would be the first to buy when every gets scared. Doing this would also keep their current portfolio price levels constant.

 

[JS80]

Originally posted by: libs0n

Originally posted by: JS80

Weaker dollar will not significantly affect american individuals. A rise in euro means BMW and MBZ corporate will make less euros. A rise in Yen will mean Japanese electronics makers will make less yens. If anything it will increase demand for american goods.

Well, I can see one place where a falling dollar will hurt americans: oil. If I'm not mistaken, the import of oil accounts for the largest portion of the american trade deficit, and the one that's been increasing most in size and will continue to do so; trinkets from china et al being overhyped as the sole problem.

Although I understand that it is one of the factors contributing to the rise in the price of a barrel of crude, I've always been curious, but never done the legwork to find out, how much of the increase can be accounted for in the decline of the American dollar. Perhaps someone can point me in the right direction to find what the price of oil has been in euros, or ounces of gold, compared with dollars over the years; if not I'll ask in the next open thread at oil drum about it.

On Buffet, guy pulled out too soon. 7% decline in 5 months? Man, those printing presses must be churning them out.

Oil is traded in dollars, so a drop in the dollar would not affect Americans. If Oil was traded in euros, then yes, a drop in the dollar would make oil more expensive. But Oil is traded in US dollars.

However, I think Iran is trading their oil in Euros now. US doesn't buy iranian oil so I'm not quite sure the full effects of that.