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Home Prices Are Back... To 1894's Levels

Tyler Durden's picture


Six years after the onset of the traumatic US housing crisis, the optics are there that suggest a stabilization is occurring. Whether real or manufactured by record-low foreclosures, bank supply withdrawals, and fed-subsidized cash REO-to-rent trades, the sad truth is that jobs (and the GDP-enhancing multiplier effect that they create) are just not coming. Even Bob Shiller prefers the potential for 4% gains in stocks over housing risk in the medium-term as he points out that - inflation-adjusted - house prices are back at levels first seen in 1894... now that is a long-term investor.



Source: Goldman Sachs


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Wed, 02/13/2013 - 23:18 | 3241992 PennilessPauper
PennilessPauper's picture

Now that's change I can beleive in!  LOL

Thu, 02/14/2013 - 00:10 | 3242097 Boris Alatovkrap
Boris Alatovkrap's picture

Two salesman is drive for long in car, must is use bathroom for solid refuse, but in countryside, is no cannot find. Finally, one is stop car get out and go behind tree. Come back in smiles. Other is quandary... ask how is to clean up? Is use dollar! Other is ask to borrow dollar. Go behind tree, come back covered with sh¡t. Other is ask what is problem!? Other is say, you can do better with 3 quarter, 2 dime, and nickel!


That is change to believe in!

Thu, 02/14/2013 - 00:16 | 3242124 SafelyGraze
SafelyGraze's picture

please to more joke of this!

aren't you?  yes, make it!


Thu, 02/14/2013 - 00:20 | 3242135 markmotive
markmotive's picture

Housing is not an investment. It's a place to live.

But when prices go up we all feel smart and rich. That is why Chris Whalen thinks the Fed is blowing another real estate bubble.

Thu, 02/14/2013 - 00:46 | 3242192 r3phl0x
r3phl0x's picture

The Fed doesn't give a fuck about whether you feel smart or rich. They are printing $85B/mo because if they didn't, the US Fed govt would default on treasuries, and then large foreign holders such as China would freak out & US citizens might wake up, realize how hard, fast, and long they've been getting fucked, and finally begin prosecuting the criminal elite responsible for this giant shit show.

The housing, stock, and commodity asset bubbles are basically just side effects.

Thu, 02/14/2013 - 00:46 | 3242207 markmotive
markmotive's picture

They don't care if I feel 'rich' or 'smart' but they care that I go out and spend money on iPads.

Thu, 02/14/2013 - 00:53 | 3242216 r3phl0x
r3phl0x's picture

Maybe a little bit, but mostly, they care that you stay poor enough to have to slave away into old age creating real economic goods/services in exchange for their paper ponzi USD. And remain stupid or scared enough to not question this reality.

Thu, 02/14/2013 - 01:05 | 3242246 markmotive
markmotive's picture

Do people still create anything real in America?



Thu, 02/14/2013 - 01:25 | 3242285 Boris Alatovkrap
Boris Alatovkrap's picture

American Idol is real, no!?

Thu, 02/14/2013 - 02:24 | 3242352 Transformer
Transformer's picture

You are most yes.  American Idol is worship, best most TV show on waves.  Real is to know you must go only sit watch and show.

Thu, 02/14/2013 - 02:57 | 3242374 Boris Alatovkrap
Boris Alatovkrap's picture

In Soviet Russia, is not citizen watch TV, but TV is watch citizen. Ooops, sorry, Boris is confuse British CCTV.

Thu, 02/14/2013 - 09:04 | 3242642 new game
new game's picture

boris come to america and see rerun of homeland.

second time is kinda boring???

Thu, 02/14/2013 - 16:18 | 3244019 AGuy
AGuy's picture

Yes, Boris, must enjoy totalitarianism. Russia & China adopt Capitalism, while US adopts Fascism!

In Soviet Russia, Political enemies were sent to Gulag. In America, America believe in Equal Rights: All of America turned into one Giant Gulag!




Thu, 02/14/2013 - 01:47 | 3242308 Vendetta
Vendetta's picture

pain and suffering ...

Thu, 02/14/2013 - 01:54 | 3242321 Thomas
Thomas's picture

Throw together 4% per annum depreciation and real estate/school taxes on top of that, there is nothing about housing that looks like an investment. You may--MAY--come out whole by including saved rent, but I would be suspect of that claim. You come out OK cause you want to live in a house.

Thu, 02/14/2013 - 03:00 | 3242377 Boris Alatovkrap
Boris Alatovkrap's picture

Thomas, you are words interesting, but why are you, how you say, manifest of large mammalian protuberances in slut T-Shirt!? Are you man or wo-man? Boris confused.

Thu, 02/14/2013 - 03:39 | 3242405 Rubicon
Rubicon's picture

Who gives a crap, enjoy the view.

Thu, 02/14/2013 - 03:51 | 3242414 Boris Alatovkrap
Boris Alatovkrap's picture

As young man, Boris is not so discernment, but once is accidentally proposition to... well, maybe is not place for this story.

Thu, 02/14/2013 - 09:06 | 3242649 Seer
Seer's picture

I hope others appreciate your humor as much as I do.  Humor is as essential as air... well, in this day and age...

Thu, 02/14/2013 - 12:17 | 3243255 Doubleguns
Doubleguns's picture

Humor good, yes, return on ass-eats, no so much.

Thu, 02/14/2013 - 12:17 | 3243256 Doubleguns
Doubleguns's picture

Humor good, yes, return on ass-eats, no so much.

Thu, 02/14/2013 - 08:57 | 3242633 new game
new game's picture

land appreciates(which it is not currently) the structure depreciates. u forgot maintaing this money pit while it ages.

factor this all in and you will better to rent.  plus u will not be wasting time fixing rather than doing fun shit like biking, golfing  and travel.

for the first time figuring taxers i didn't qualify for itemization, so that is out the door.

refi at 3 percent and that is what happened...

two properties - one for sale, when sold next on the market. time to live life...

Thu, 02/14/2013 - 09:12 | 3242670 Seer
Seer's picture

I've got property.  It provides for my heating needs, as well as my "peace of mind"- I, my dog and wife often go for nice long walks.  We raise animals which provide food.  And, property taxes are lower than for most because it's classed as Ag land: it's my contractual agreement that I will not piece out the land to "developers."  Lots of life happening on our property...

Thu, 02/14/2013 - 11:27 | 3243055 Boris Alatovkrap
Boris Alatovkrap's picture

Boris is enjoy apartment in Minsk. Share with in-laws and other two family, but rent is low and when above -40°C, can go for long walk.

Thu, 02/14/2013 - 08:02 | 3242567 Cloud9.5
Cloud9.5's picture

We make lots of bullets, bombs, drones, etc.

Thu, 02/14/2013 - 09:03 | 3242640 Clark Bent
Clark Bent's picture

Also traffic violation surveillance cameras. What a douchebag invention. 

Thu, 02/14/2013 - 00:47 | 3242200 CheapBastard
CheapBastard's picture

As anyone over 40 knows, the RE market right now is a good example of 'The Greater Fool' Theory in action:


The greater fool theory (also called survivor investing) is the belief held by one who makes a questionable investment, with the assumption that they will be able to sell it later to "a greater fool"; in other words, buying something not because you believe that it is worth the price, but rather because you believe that you will be able to sell it to someone else at an even higher price.


Over 40 folks have seen RE cycles which younger may not understand.  I'm a Cheap Bastard so I'll wait until the correction is completed....probably another 40-50% down for most locations. I don't understand why some people get in such a tizzy, almost manic, to lock in a 30 year depreciating asset around their ankles.

Thu, 02/14/2013 - 03:10 | 3242385 RockyRacoon
RockyRacoon's picture

Yeah.  I was just beginning to sell some condos I'd rehabbed in the 1980s.  Interest rates were pushing 20% when I just stopped and rented the bastards out.  Been down some long and winding roads.  This current real estate crap is just another bump in the road.

Thu, 02/14/2013 - 03:14 | 3242390 zhandax
zhandax's picture

It all comes down to location.  We didn't have any doubling in prices here during the boom.  Similar SF in my neighborhood currently sells for about 10% more than I paid in 2004.  At the peak they were selling for about 25% more.  There are currently only two houses for sale in the neighborhood (~100 houses).  There are some benefits to be had in flyover country.

Thu, 02/14/2013 - 06:10 | 3242488 Peter Pan
Peter Pan's picture

The chart is misleading. Prices are actually at levels lower than 1894, the simple reason being that houses today are on average much larger. This skews the results.

Thu, 02/14/2013 - 09:16 | 3242679 Seer
Seer's picture

Also would need to factor in that houses today are a lot more expensive to build.  And don't forget that a LONG time ago (OK, mostly pre 1970s)  there tended to be only a single wage-earner to a given household.

Thu, 02/14/2013 - 13:33 | 3243515 FrankDrakman
FrankDrakman's picture

Geez, is price the only thing people look at? We have a country home that was built in 1910. Plaster over lath, clapboard outside wall, no insulation at all, a cellar that is dark and gloomy, no air conditioning, "central heating" in the sense it has an oil burner in the centre of the living room, single pane windows, all wooden beams (which, after 100 years, rot and sag, unlike, say, steel), etc., etc. It's fine in the late spring/summer/early fall, but come November-March - when we like to use it because it's near the ski hills - it's pretty damn cold at 7 am.

Don't quality, features, and utility count for anything?! 

Thu, 02/14/2013 - 11:30 | 3243069 RockyRacoon
RockyRacoon's picture

Next you'll be applying hedonic adjustments to the prices:  We got them granite tops too!

If you use "a place to live" as the criterion, you have the numbers.

Thu, 02/14/2013 - 11:35 | 3243087 MeBizarro
MeBizarro's picture

Exactly.  'Average home price' is really a shitty indicator on several levels.   I much prefer to see the trend in value/sq. foot but I would highly doubt that is available except in certain urban areas.   

Thu, 02/14/2013 - 09:52 | 3242775 Lucius Corneliu...
Lucius Cornelius Sulla's picture

Totally agree.  Unless the NET cap rate is 10%, it is not even worth the effort.  Rentals are a lot of work because houses depreciate so you are constantly dealing with repairs.  Plus it is a pain in the ass and a lot of risk being a landlord.

Thu, 02/14/2013 - 11:41 | 3243110 MeBizarro
MeBizarro's picture

As long as the renters don't have pets, it's generally fine.  Cats are the worst because cats will inevitably piss somewhere that gets into wood.  You simply can't get rid of that smell and can't refinish the wood.  Why I won't rent to someone that has a cat or dog. 

As for the work, if you can do most of the inside stuff yoursellf and contract with someone or have the tenet shovel/mow the grass for a small fee, it's not that big a deal if you have a 2 or 3 unit property for rent.  Just need to buy a good location, be willing to not waste free time on stupid crap that most people do, and know how to do handiman work yourself.       

Thu, 02/14/2013 - 10:46 | 3242927 thisandthat
thisandthat's picture

Didn't you just broadly described capitalism (ie: profit oriented economy)? It takes a greater fool to make a profit out of anything.

Worth is demand/offer; if there's a profit to be made, it's worth whatever the asking price; if not, it isn't, regardless how cheap it is.

Thu, 02/14/2013 - 10:27 | 3242866 gaoptimize
gaoptimize's picture

Say "Moose and squirrel"

Thu, 02/14/2013 - 00:38 | 3242190 Mr Pink
Mr Pink's picture

Um...yeah...looks like there is something wrong with that link.....oh well, you get the point

Thu, 02/14/2013 - 11:32 | 3242387 RockyRacoon
RockyRacoon's picture


And you can edit your comment any time before it gets a reply.  Since you replied to your own comment, you locked it up.

Wed, 02/13/2013 - 23:19 | 3241995 DriveByLurker
DriveByLurker's picture

McKinley-nomics will fix the economy.  

Thu, 02/14/2013 - 00:08 | 3242100 Boris Alatovkrap
Boris Alatovkrap's picture

McKinley is kill by socialist agitator assassin, no?

Thu, 02/14/2013 - 08:34 | 3242608 DanDaley
DanDaley's picture

Boris, you are being correct.  American politician are getting liquidated by Democrat/socialist/leftist...peoples who are wanting control of gun -

      -John Wilkes Booth –Democrat (murder of Lincoln);

-Leon Frank Czolgosz –anarchist follower of Emma Goldman (murder of William McKinley)

-Lee Harvey Oswold –leftist/communist (murder of John Kennedy);

-Lynette Alice (Squeaky) Fromme –environmentalist wacko (attempted murder of Gerald Ford);

Sarah Jane Moore –extreme leftist (attempted murder of Gerald Ford);

John Hinkley, Jr. patterned himself after Lee Harvey Oswald (attempted murder of Ronald Reagan)



Thu, 02/14/2013 - 11:30 | 3243068 Boris Alatovkrap
Boris Alatovkrap's picture

Boris  is only one word for description of American Assassin... PATSY!

Thu, 02/14/2013 - 12:40 | 3243348 Withdrawn Sanction
Withdrawn Sanction's picture

Let's not forget, the handwritten death threat sent to Pres Andrew Jackson in summer 1835 (following the veto of the 2nd Bank of the US's charter).  It was later found to have been written by Junius Brutus Booth, father of John Wilkes Booth. 

Jackson had also survived an earlier assasination attempt by Richard Lawrence (another lone gunman) in Jan 1835.  Many then (and now) believe Lawrence was put up to the job by European and Philadelphia banksters, pissed at the veto of the BUS's charter.

Thu, 02/14/2013 - 04:23 | 3242436 Daily Bail
Daily Bail's picture

This is completely ridiculous.  Bloomberg's Tom Keene almost loses it on air.

A Look Inside The Sports Illustrated Swimsuit Issue

Wed, 02/13/2013 - 23:19 | 3241996 FreeSlave
FreeSlave's picture

hmmm...?! should I trust this info, and at least purchase my primary residence? some good advice needed please...

Thu, 02/14/2013 - 00:07 | 3242054 DaveyJones
DaveyJones's picture

considering that everything is yet to unwind and that these are prices with artificially and ridiculously low interest rates that will blow at some point and with an employment picture that will only get worse and a raw resource and energy picture that will only do the same.... 

that said, maybe a small house, well insulated, on some fertile land

Thu, 02/14/2013 - 00:34 | 3242171 r3phl0x
r3phl0x's picture

Once the big 2-3 US banks own and rent-out >50% of the housing market, you better believe that housing prices will always go up, regardless of unemployment or any other metric that should rationally affect prices. The banks have to prevent their renter-serfs from ever buying & thereby partially escaping the long-term USD inflation caused by their buddies at the Fed.

Fuck everything about this shit.

Thu, 02/14/2013 - 11:24 | 3243042 DaveyJones
DaveyJones's picture

good points but exponential math will ultimately beat corruption and lies

and when it blows, and because there is no honor amongst thieves, bankers will, for at least a brief and very angry moment in history, slip

Thu, 02/14/2013 - 02:15 | 3242347 A Nanny Moose
A Nanny Moose's picture

I keep waiting for those bond vigilantes. Perhaps they were burned at their own stakes?

Thu, 02/14/2013 - 03:18 | 3242394 zhandax
zhandax's picture

We're a patient lot.

Thu, 02/14/2013 - 09:37 | 3242727 Seer
Seer's picture

"that said, maybe a small house, well insulated, on some fertile land"


Also, and this is a "free" tip: be sure to orient toward/away from the sun as pertains to your location (heating/cooling energy requirements).  I cannot over-stress the importance here.

Prices can go down, but it's likely going to come at the expense of increased interest rates.  Unless one is cashing out* it'll wash the same as with higher prices and lower rates. * If you cash out you don't have the ability to write off mortgage interest; you also lose out on the possibility that one day the mortgage collector may not show up- let the banks carry this risk; not cashing out also means you've got $$s for acquiring needed additional assets (I opted for a tractor and other equipment; also needed $$s for various repairs).

Non-landlubbers exempted/not applicable.

Thu, 02/14/2013 - 00:28 | 3242154 Never One Roach
Never One Roach's picture

Yes. There has never been a better time then now to lose money in RE.  These prices won't last long, so better grab one fast, before the price drops.

Thu, 02/14/2013 - 01:59 | 3242332 ebworthen
ebworthen's picture

Somewhere that housing is at 1869 levels, with water, arable land, and where you can build fences and have big dogs, chickens, and some goats.

Be sure and stock up on firewood, guns, ammo, and knowledge.

Some whiskey and a good Woman wouldn't hurt.

Shoot trespassers first, ask questions later.

Thu, 02/14/2013 - 09:46 | 3242754 Seer
Seer's picture

Make sure you have good neighbors.

WTSHTF is no time to make the move.

About goats... be prepared to spend money on fencing!  (for containment AND for protection- if they aren't trying to kill themselves it's something else that is!)  I'm still undecided whether I want to go down this path (use them, which will require $$s for fencing and care, or use my tractor to clear brush, which will cost me my time and some $$s).

I don't drink (my personal self-imposed choice- I'm only laid back when I'm busy [otherwise I'm doing a ton of thinking] :-)  ).  But... all that is made up because my Woman is more than "good" :-)

Wed, 02/13/2013 - 23:19 | 3242000 Eireann go Brach
Eireann go Brach's picture

And all the realtors will post this on their facebook page tomorrow and tell everyone it is a good thing!

Wed, 02/13/2013 - 23:23 | 3242005 Buck Johnson
Buck Johnson's picture

No kidding, they are doing everything to make it seem bad news and bad data is good data.  They know that the implosion is coming but they aren't allowed to tell people any bad news.

Thu, 02/14/2013 - 00:31 | 3242165 FEDbuster
FEDbuster's picture

I heard one of their retarded commercials the other day stating that the kids of people who own homes get better grades than the kids who's parents are renters.   They went on to talk about stable environment, etc...  They will say and do anything to pump this market back up.

Wed, 02/13/2013 - 23:24 | 3242007 Bunga Bunga
Bunga Bunga's picture

"It can't go lower from here, the bottom is in!"

Thu, 02/14/2013 - 02:26 | 3242355 Transformer
Transformer's picture

And prices could only go up from this point, but it might still not be the bottom.  all depends on real inflation.

Thu, 02/14/2013 - 09:41 | 3242735 Rustysilver
Rustysilver's picture

Please check Detroit. thanks

Thu, 02/14/2013 - 00:08 | 3242101 Freddie
Freddie's picture

I bet a lot of realtors will get facelifts, Mercedes leases and boob jobs by closing a few deals with this report. 

Thu, 02/14/2013 - 09:49 | 3242771 Seer
Seer's picture

My real estate agent (she sold my "city" home and facilitated the purchase of my rural home) doesn't belong to NAR.  She knows better... (and I don't believe she has an FB page).

Wed, 02/13/2013 - 23:19 | 3242001 holdbuysell
holdbuysell's picture

John Williams' Shadowstats weighing in on this with the CPI adjustments made since the 80's will show these to be lower. Would be interesting to know how much lower.

Wed, 02/13/2013 - 23:22 | 3242002 Bunga Bunga
Bunga Bunga's picture

What about wages adjusted for inflation?

And 100 is not a rock hard bottom. It can go down to 50.

Thu, 02/14/2013 - 00:23 | 3242146 TotalCarp
TotalCarp's picture

This is total bollox until they explain what they used to adjust for inflation. There werent any ipads in 1896 as far as i can remember.

unless they add housing in gold/silver/platinum basket terms or housing in equity terms charts this is about as meaningful as the rest of their vampire squid drivvel.  

Wed, 02/13/2013 - 23:25 | 3242004 TahoeBilly2012
TahoeBilly2012's picture

Wait Tyler's don't start comparing a Sear's Craftsman cut and shipped a hundred years ago with a chinese drywall "Home Depot special" built by amigos today, I will gladly take the the 1894 peak home but new today!

Wed, 02/13/2013 - 23:27 | 3242014 Bunga Bunga
Bunga Bunga's picture

but but but the chinese drywall home comes with three flatscreen TVs (made in China).

Wed, 02/13/2013 - 23:39 | 3242045 otto skorzeny
otto skorzeny's picture

the wood was good 100 years ago but the rest of the house was shit

Thu, 02/14/2013 - 01:31 | 3242290 infinity8
infinity8's picture

That's what she said.

Thu, 02/14/2013 - 02:02 | 3242335 ebworthen
ebworthen's picture


"Good wood", yeah, what she said.

Rather have good wood than crappy composite shit and a fucked up crazy ass suburban neighborhood.

Wed, 02/13/2013 - 23:28 | 3242019 darteaus
darteaus's picture

One year after the Gold Panic of 1893



Wed, 02/13/2013 - 23:28 | 3242020 babylon15
babylon15's picture

Can't wait till stocks are back to 1894 levels.

Thu, 02/14/2013 - 01:05 | 3242242 r3phl0x
r3phl0x's picture

I know the hyper-inflationists have been wrong for the past 4 years, but a deflation of that scale is simply not possible with Ben at the Fed. If you think $85B/mo is crazy, wait until you see what he does if the US stock market has a 30% down day. It would just provide an excuse to print even more money and enable an even larger Federal deficit. Obama could create a society with, say,  60% takers instead of the 47% or whatever it is now. Takers are by far the most reliable voters in a democracy.

Thu, 02/14/2013 - 01:25 | 3242284 AlaricBalth
AlaricBalth's picture

Joseph Schumpeter discusses the exact political-economic devolution, of which you mention, in his book Capitalism, Socialism and Democracy. If you haven't read it, I recommend it highly.

From Wiki:

"Schumpeter's theory is that the success of capitalism will lead to a form of corporatism and a fostering of values hostile to capitalism, especially among intellectuals. The intellectual and social climate needed to allow entrepreneurship to thrive will not exist in advanced capitalism; it will be replaced by socialism in some form. There will not be a revolution, but merely a trend in parliaments to elect social democratic parties of one stripe or another. He argued that capitalism's collapse from within will come about as democratic majorities vote for restrictions upon entrepreneurship that will burden and destroy the capitalist structure..."

Thu, 02/14/2013 - 01:56 | 3242327 r3phl0x
r3phl0x's picture

Thanks - I'm a big fan of his, but haven't read the book yet.

Thu, 02/14/2013 - 10:01 | 3242802 Seer
Seer's picture

It's an issue of growth decay, which is a certainty (finite planet being the ultimate bounding parameter).  Capitalism is great for opening up the champaign bottle, but as it gets emptier the time comes when conservation starts to trump it- and, paradoxically, "socialism" becomes "conservatism" (through increased control)*.

* Are the Amish socialists or capitalists?

I don't see this so much as being sinister as it being an inescapable fact of life/reality (the path that growth leads to).

Thu, 02/14/2013 - 10:48 | 3242931 gaoptimize
gaoptimize's picture

Internally or externally?  Externally, capitalists.  I have pictures.  Internally, I don't know.

Wed, 02/13/2013 - 23:29 | 3242021 Water Is Wet
Water Is Wet's picture

If you bought oil and gas land (with like a little bitch ranch house) in 1894, you are at fucking filthy rich asshole levels.

Thu, 02/14/2013 - 00:37 | 3242189 FEDbuster
FEDbuster's picture

Location, location, location....

My friend's parents bought a 1600 sq ft ranch home in Cupertino in 1965 for $18K, sold it in 2005 for $975K.  I'm sure they beat the chart above.  Location and timing are everything.

Wed, 02/13/2013 - 23:32 | 3242026 Goldilocks
Goldilocks's picture

Obama's remarks at Linamar Corp. on manufacturing


Wed, 02/13/2013 - 23:50 | 3242058 Spaceman Spiff
Spaceman Spiff's picture

That is about 10 minutes from where I live...


I'm so pissed he is considering this area to move to in the future post presidency.  I was looking forward to him fading away in chicago and not having to see news about him daily.  Good luck with the celebutard worshipping press around here.


As for Linamar, it is a foreign company that got a bunch of sweet heart deals from the local, state, and federal government.  Perhaps if they were business friendlier in the first place, we would not have gone through the Volvo departure...

Wed, 02/13/2013 - 23:33 | 3242027 francis_sawyer
francis_sawyer's picture

Californy is the place u ougtta be... Swimmin pools... Movie Stars...

Wed, 02/13/2013 - 23:40 | 3242048 Osmium
Osmium's picture

nuthin better they lying around by the Ce-Ment pond.

Wed, 02/13/2013 - 23:34 | 3242029 chump666
chump666's picture



Wed, 02/13/2013 - 23:37 | 3242033 otto skorzeny
otto skorzeny's picture

WOW-4% possible upside in stocks with a potential 50% or more downside-that's a bet I'd love to take. Instead-why don't I take my $ and throw it down on one of that hebe Sheldon Adelson's gambling tables? Fuck you Bobby Baby and all of your East Coast elite Ivy League Ivory Tower soddomite buddies.

Wed, 02/13/2013 - 23:37 | 3242041 chump666
chump666's picture

Hell yeah:

Cycles of life baby...

Thu, 02/14/2013 - 10:51 | 3242938 gaoptimize
gaoptimize's picture

Follow the yellow brick road!

Wed, 02/13/2013 - 23:40 | 3242046 Tsar Pointless
Tsar Pointless's picture

I have a Low monthly mortgage. Lower than the rent I was paying on my last apartment. At this point, MUCH lower than it would be.

I have a car loan that is a year away from being paid off. Only a few thousand in credit card debt.

Sure, I live in hell - aka, Pittsburgh. But it is "cheap" here. So are most of the people, so you get what you pay for, I know.

Steelers, Penguins. Blah blah blah. Proles are so easily entertained.

But it keeps me "in the game", so to speak.

Thu, 02/14/2013 - 00:18 | 3242131 Freddie
Freddie's picture

No - Philadelphia is hell.  Pittsburg is not as bad as Philly.  Some of the people in Pittsburgh are decent.

Thu, 02/14/2013 - 00:33 | 3242170 Cabreado
Cabreado's picture

I don't live there, but Pittsburgh gets a bad rap.
Don't beat yourself up for living where somebody else decides it sucks.

I know people that love it.

It's not where you are -- it's what you're doing, and who's with you along the way.

Wed, 02/13/2013 - 23:51 | 3242060 Lucius Corneliu...
Lucius Cornelius Sulla's picture

Forget housing, a leveraged bond portfolio with unlimited free dollars would be awesome!  Where do I sign up?

Wed, 02/13/2013 - 23:52 | 3242065 Theta_Burn
Theta_Burn's picture

Materials costs will set the bottom.

Soon, with all these vacant homes, the copper piping won't be the only thing that will disappear,  I foresee 2x4 and oak flooring salvage yards springing up everywhere soon..

Thu, 02/14/2013 - 00:49 | 3242213 Freewheelin Franklin
Freewheelin Franklin's picture

Copper? Nobody uses copper. It's all that PEX shit. May as well use garden hoses.


No more 2x4s, either. Galvanized metal studs. And oak flooring? Factory finished shit.


I'm working in a house now that's about 80 years old. It has all solid mahogany doors throughout the house. I told the guy to replace them with that masonite shit and sell them. He'd make more money from selling the doors than selling the house.

Thu, 02/14/2013 - 10:19 | 3242838 Seer
Seer's picture

Copper over PEX?

I'd take PEX-A any day.  Less concern over rupturing pipes from freezing.  Less concern over corrosion.  AND, you generally don't have to worry about someone ripping your PEX plumbing out of your walls: well, when one gets hard up for $$s in the future I suppose that one could rip out the copper themselves, but this starts to nullify the value as pertains to initial function.

"solid mahogany doors" Kind of hard to make new ones these days for sure.  Internal use fine, but external solid wood doors suck (rented a home with them and the things would swell up and bow, making sealing a bit tough).

Wed, 02/13/2013 - 23:54 | 3242069 Drunken Monkey
Drunken Monkey's picture
Home Prices Are Back... To 1894's Levels

Which is as it should be, because a house is not an "investment" that should be expected to increase in value, it's a durable good like a car or a stove that should, if properly maintained, be expected to slowly loose value, all other things being equal.

Thu, 02/14/2013 - 10:24 | 3242852 Seer
Seer's picture

There are TWO components: anyone who pays property taxes should be aware of this.  The land, and the "improvements."

A "house" could be a financial investment if you are able to rent it out (in whole or part), though this is clearly like any other business activity- highly dependent upon your business model (market and cost controls etc).  Land, however, can more readily be an investment, especially if raw and or ag.

Thu, 02/14/2013 - 00:02 | 3242087 trillion_dollar...
trillion_dollar_deficit's picture

Wait until the Fed pulls the rug out of the bond market and the 10 yr mean reverts to 6%. 

The rule of thumb Ive always used is $10k in home value per 100 bps swing in rates.

Thu, 02/14/2013 - 00:36 | 3242177 Never One Roach
Never One Roach's picture

<<The rule of thumb Ive always used is $10k in home value per 100 bps swing in rates.>>


I think that works for houses under $200k to $300k but when you get higher up the drop per percentage hike in rates will be much there will be a ripple effect (aka more hsock waves) that drive prices even lower as Shiller describes in one of his books.

Thu, 02/14/2013 - 01:07 | 3242251 trillion_dollar...
trillion_dollar_deficit's picture

Definitely. The $10k is probably a good floor number.

Thu, 02/14/2013 - 02:05 | 3242336 socalbeach
socalbeach's picture

During the 70's both home prices and interest rates increased substantially.

Thu, 02/14/2013 - 10:28 | 3242872 Seer
Seer's picture

This is 2013.  The Fed is buying real estate because there's no market, unless, that is, they want to completely blow out the bottom.

Thu, 02/14/2013 - 00:18 | 3242132 Glass Seagull
Glass Seagull's picture

Bernanke: "Ha!!! Real home values are meaningless, inflation counts!!"

[as his eyes dart nervously to the place on his bookshelf dedicated to books about inflation-adjusted housing performance through history]

Thu, 02/14/2013 - 00:19 | 3242133 Glass Seagull
Glass Seagull's picture


Thu, 02/14/2013 - 00:22 | 3242144 besnook
besnook's picture

and there you have the proof you need to show the real price of real estate tracks inflation(wages) the way it should over the long term. the safe place to buy is on the equilibrium line to lock in present value dollars over the term of ownership hedging against future inflation.

what is interesting about this chart is the dump in value real estate took immediately upon the establishment of the fed that didn't recover until the ww2 boom. does that mean the fed failed initially in its mission to pump assets except for the leveraged induced stock market boom and the florida real estate boom of the 20s(popped in 1926).

Thu, 02/14/2013 - 00:22 | 3242145 moonstears
moonstears's picture

So a house is now $400? Where, fucking Detroit "moto citeee, bitchez"? Even in silver that's $10K. Agree that's where we need to be($10K) but not realistic, YET.

Thu, 02/14/2013 - 00:30 | 3242163 lolmao500
lolmao500's picture

It needs to go back down a whole lot more.

Thu, 02/14/2013 - 00:30 | 3242164 GrinandBearit
GrinandBearit's picture

Another RE bubble is blowing, especially in cities that got nailed in 2006-2009

It's hard to believe, but some areas of So Cal are back their 2006 bubble top prices.  Flippers, rich foreign (mainly Asian) buyers, banks holding back inventory, FHA loans, low interest rates and slimy RE agents are all fueling this new bubble.

It appears that NO ONE has learned any lessons from a few years ago. 

It's truly fucking bizarre.

Thu, 02/14/2013 - 00:51 | 3242215 devo
devo's picture

That's the moral hazzard. It isn't bizarre at all. What is bizarre is that reinflating the housing bubble is Bernanke's best idea.

Thu, 02/14/2013 - 01:01 | 3242239 GrinandBearit
GrinandBearit's picture

The Fed really has no other choices.

Thu, 02/14/2013 - 11:44 | 3243118 MeBizarro
MeBizarro's picture

Yup.  They have to keep the banks and local gov'ts solvent.   Really a series of bad options all around and I understand why Bernanke has been doing it even if it has some horrendous side effects both short-term and long-term. 

Thu, 02/14/2013 - 01:58 | 3242331 Vendetta
Vendetta's picture

Indeed.  I don't see a single true fundamental factor accounting for 'recovery' of insanity.

Thu, 02/14/2013 - 04:30 | 3242442 chubbyjjfong
chubbyjjfong's picture

+1.  We all know there is more money floating around now than ever before.  Those elite fortunate enough to have 'shit loads' sitting on the sidelines are certainly not investing it in the stockmarket.  Where are they likely to put it?  The first place is high end property that they, or their children, may some day like to live (or survive).  Its the same the world over. Isolated pockets of insanely inflated real estate totally contradicting all logic.  The beginnings of inflation perhaps? Not long before they turn their financial attention to the shit we all need.

Thu, 02/14/2013 - 01:08 | 3242254 cherry picker
cherry picker's picture

This is bull shit.  In 1894 many people built their own homes, not like today.

They couldn't get mortgages like today to my knowledge.  I they could get a mortgage it was for the priveledged few.

It is almost impossible to compare homes from that era and equate it to a salary to today as the homes for most middle class were not the 2-3 thousand square foot castles prevelant in so many places today.  How do you equate a blacksmith's, carriage builder or typesetter's salary to one of today?  Those vocations are mostly extinct.

Thu, 02/14/2013 - 01:56 | 3242325 Vendetta
Vendetta's picture

I think the golsmiths' of yesteryear were doing the same game the Blankfein's of the world today are doing, the names have changed to protect the guilty.

Thu, 02/14/2013 - 06:53 | 3242518 MisterMousePotato
MisterMousePotato's picture

In the early 1900s, my first wife's grandfather moved to the United States from Italy. He bought a lot (quarter acre? probably less) in Cranston, Rhode Island.

He got a shovel and started digging a basement/foundation.

House was still there last I knew. It was a nice, typical for the era house.

Thu, 02/14/2013 - 11:46 | 3243127 MeBizarro
MeBizarro's picture

Few very people built their own homes in 1894 because just as today they lacked the skill sets, tools, and knowledge required. 

Thu, 02/14/2013 - 12:22 | 3243285 cherry picker
cherry picker's picture

In my youth and later into my twenties in Canada, many of us built our own homes.  We hired tradespeople for the stuff we couldn't do.  The house I built on five acres in 74 is still standing and wuite nice to look at.


The reason we did this?  We couldn't afford to purchase from a "developer".  Don't forget, a far larger portion of the population did not live in urban areas like they do today and even in urban areas, laws not as stringent as today.  A person could built quickly and easily with the help of friends and family.

Thu, 02/14/2013 - 01:09 | 3242255 CuriousPasserby
CuriousPasserby's picture

Home prices can stay the same for 100 years but if you are netting $500 or $1000 from the rent you collect every month, on every house, year after year, you are doing good. I know people who don't work other than minor fixups, and collect $5000 a month in rents.

Thu, 02/14/2013 - 01:09 | 3242260 steve from virginia
steve from virginia's picture



$100k in 1890 would purchase a palace, not a house. An ordinary 4-6 room single family house in any US city or town would cost about $1000 to build ... or less.


The same $100k house today would be worth hundreds of thousands or millions today:

Thu, 02/14/2013 - 14:16 | 3242543 Mi Naem
Mi Naem's picture

I refer to my previous statement to you:

I am still glad that you are not "in charge". 


I also refer to the article that seems to have been written about you:

graph says "adjusted for inflation"

Thu, 02/14/2013 - 09:41 | 3242736 Lucius Corneliu...
Lucius Cornelius Sulla's picture

The house I own was built in 1959 and first sold for $15,000.  Zillow says its worth $350,000.  But average salaries in 1959 were about $5,000/year.  Now they are closer to $100,000/year.  Its all relative.

Thu, 02/14/2013 - 01:33 | 3242264 socalbeach
socalbeach's picture

Housing priced in gold using 2 different Fed FRED housing metrics.

Sorry, housing looks cheap relative to gold, although it depends on location obviously.

Thu, 02/14/2013 - 01:56 | 3242324 alentia
alentia's picture

It is not there yet. Average median historical price of a house in gold ounces =100.

Lowest it was, 80 ounces of gold in US and UK. When house in San Francisco, Chicago (north) or Huston drops to 80 or even 100 ounces it might be good time to buy.(if you still want to live in US)


If I remember correctly in 2007 average price for a house in US shoot up to 450 ounces. (And in 2009 Obama started talking about "green shots")


In Canada now we are dancing dangerously at 300 ounces of gold per average house, but it is still shy from a bubble.

Thu, 02/14/2013 - 02:50 | 3242348 socalbeach
socalbeach's picture

I got rid of the log scale on the preceding graph, and it looks like 100 oz of gold is the minimum median price (blue line), not the average median price, going back to 1968 (earliest available data on FRED for gold).

Thu, 02/14/2013 - 01:36 | 3242296 Me_Myself_and_I
Me_Myself_and_I's picture

But my house today has running water, electricity, central AC/heat, a pool, and no black widow spiders.

Sorry, but I wouldn't blow two snots for an 1894 home.  

Thu, 02/14/2013 - 06:55 | 3242522 MisterMousePotato
MisterMousePotato's picture

I live in a house built during the War of Northern Aggression. Everyone likes this house.

Thu, 02/14/2013 - 06:57 | 3242523 MisterMousePotato
MisterMousePotato's picture

p.s. Electricity, running water and indoor plumbing, and gas lighting were subsequently added. No pool. No air conditioning. And, yes, we do have black widow spiders. (Man, are they creepy/ugly/scarey or what?)

Thu, 02/14/2013 - 01:49 | 3242311 Vendetta
Vendetta's picture

I'll take the $100,000 house built in 1890

Thu, 02/14/2013 - 01:55 | 3242323 ebworthen
ebworthen's picture

Does this mean I can shoot the crooked Sheriff and homestead 40 acres?

Thu, 02/14/2013 - 02:05 | 3242341 OutLookingIn
OutLookingIn's picture

Absolute "JimCrackery!"

$100,000 in 1898 dollars would have the same purchasing power as one million dollars today!

Thats why during the deflated land prices of the twenties & thirties, the moneyed elite snapped up almost all the good farmland and housing real estate, at bargain basement pricing.

Current housing pricing is not even back to its long term medium. Lower prices to come yet.

Thu, 02/14/2013 - 02:48 | 3242372 gregga777
gregga777's picture

Read the explanatory text in the graph!  


It says the dollar values are INFLATION adjusted!  Therefore that 1894 house probably sold for around $2,000, in 1894 dollars, not $100,000 2013 dollars..


I think the article about the high level of adult illiteracy in America probably underestimates the problem.

Thu, 02/14/2013 - 09:29 | 3242712 Village Smithy
Village Smithy's picture

Do not take your intelligence for granted my friend. Not everyone is born as capable as you. Use your power for good, not sarcasm.

Thu, 02/14/2013 - 10:20 | 3242841 CuriousPasserby
CuriousPasserby's picture

The really scarey thing is that half the people (and half the voters) have a below-average IQ!

Thu, 02/14/2013 - 02:32 | 3242360 IridiumRebel
IridiumRebel's picture

All I know is that some stupid person is going to buy my house. Offer is made and hoping counter will work as we should break even after taking the fuckhead bait from "da 8 tousand dollAh taxi break"! Dirka Dirka! This was pre-zerohedge and pre access to critical thinking brain. Signing the fucking papers and then I'm out! I'll feel bad when the bottom drops out, but hey, I gotta watch my family's back. 1894....fuck. Fuck You Debt Slavery!

Thu, 02/14/2013 - 04:42 | 3242451 kurt
kurt's picture

Hey, I'm the guy who WAS going to buy your house.

Thu, 02/14/2013 - 04:46 | 3242453 IridiumRebel
IridiumRebel's picture

I doubt it. She is a teacher who is placing a couple 20s down and a promise from Obama via FHA. Fannie and Freddie are totally solvent ya know. I'm out. I'll rent and see what happens.

Thu, 02/14/2013 - 02:39 | 3242367 NidStyles
NidStyles's picture

Well housing prices should go down. It's not like the technology that goes into a house has been drastically improving or anything, and the market is flooding FFS.

Thu, 02/14/2013 - 03:48 | 3242407 socalbeach
socalbeach's picture

Real estate prices don't need to exceed the inflation rate to make money.  Here's a simple example:

Let's say you buy a $300K house and put 20% or $60K down.  Also assume your total payments (taxes, insurance, fixed rate mortgage payment, maintenance, etc.) equal what you would have paid for rent.  In some places in CA, you can still actually buy and have your total payments be less than what you pay in rent because of Fed supression of interest rates  Also ignore any tax advantages you might get by owning.

Then assume prices for everything double and you sell.  For simplicity ignore principle repayment so your loan is still $240K, and also ignore commissions (there are some discount agents you could use, or getting a r.e. license to reduce the commissions isn't that hard).

Then after paying off the loan you would net $360K ($600K - $240K loan), which would be worth $180K after adjusting for a doubling of the price level. So in this hypothetical example you've tripled your money ($180K/$60K).  And if you're married you wouldn't have to pay any Federal income taxes because of the $500K exclusion on the sale of a primary residence.

Like I said this is a simplified example, because prices for everything don't go up by the same amt.  And if you think prices are going to drop in general (price deflation) then you obviously wouldn't want to use leverage to buy a home.  But this is the type of calculation you could do before deciding to buy, whenever that may be.

Thu, 02/14/2013 - 04:42 | 3242452 IridiumRebel
IridiumRebel's picture

This is all fine and well, but these "tax breaks" are gonna be axed soon when CRUSHING DEBT catches up and they go after anything that isn't nailed down. All I see is greedy Füx blowing and bursting bubbles at quicker increments until one final fuckass hits. We are about to(read already have) enter a recession which is going to be a fois gras appetizer to DEPRESSION; real depression. The kind of depression where people are cutting down trees from forests just to warm their homes. 25% youth unemployment depression. That's house ain't gonna be worth shit in SoCal when everyone starts trying to kick us when we are down. N. Korea has its eye on The west coast. I think if you are planning on staying in the same house for 30 years, then locking in at this rate is smart. Otherwise, it better be a killer deal with lots of land.

Thu, 02/14/2013 - 03:45 | 3242410 Sudden Debt
Sudden Debt's picture

I bet houses didn't have airco in 1894...

Thu, 02/14/2013 - 08:03 | 3242568 Tango in the Blight
Tango in the Blight's picture

That's because airco was invented about a decade later.

Thu, 02/14/2013 - 03:58 | 3242421 Dre4dwolf
Dre4dwolf's picture

Dead cat bounce?

Thu, 02/14/2013 - 06:08 | 3242487 e-recep
e-recep's picture

that means we have some more way to go till we reach 1920s levels.

Thu, 02/14/2013 - 06:47 | 3242513 SilverMoneyBags
SilverMoneyBags's picture

How do you see a stablization? Its a very real concept that we could still plunge below the mean.

Thu, 02/14/2013 - 11:58 | 3243175 De minimus
De minimus's picture

Ya Think?

Thu, 02/14/2013 - 09:16 | 3242680 orangegeek
orangegeek's picture

Philly Housing Index (HGX) is or perhaps has completed wave B up.


Wave C down is next.  Deflation is picking up momentum once again.

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