“House Prices Seen Slowing,” says the LA Times.
And more news from Contra Costa, also in the Golden State:
Christopher Thornberg, senior economist with the UCLA Anderson Forecast, told a business group that he believes a drastic deceleration in home sales is coming. “You are starting to see a slowdown in housing market activity, and that says loud and clear that things are starting to break,” Thornberg said.
Thornberg believes house prices are about 30 percent to 40 percent overvalued. But a return to normal is not an easy matter, he explained. “If you have a big decline in unit sales, you’ll have mortgage brokers and real estate agents and construction workers all losing jobs. And what’s driving the California job market right now? Construction, finance and real estate jobs. Those will go away…all that wonderful money is going to disappear. Suddenly, the house isn’t going to be able to pay for the kids’ education, it’s not going to pay for your retirement in Bermuda and it’s not going to pay for that face-lift at age 74.”
Thornberg adds, “…we have peaked. And beyond that is a downhill run.”
We have wondered about that. Everywhere we look, there is so much “wonderful money.” On our street in London there is a Ferrari dealer and a Lamborghini dealer. It seems as though every other car is a Porsche or a Mercedes. And, looking around this past weekend, we saw an ordinary house for sale — three bedrooms, three baths, parking space. It was ordinary in every sense but one: it is priced at about $9 million. A pretty far run downhill for someone.
Also in yesterday’s news, Bloomberg reports that Wall Street will hand out $21.5 billion in bonuses. All that wonderful money! Where does it come from? What does Wall Street do to earn it? The masters of the universe on Wall Street tell us that they “allocate capital efficiently.” They must be doing a heckuva job allocating capital. We’re surprised that there is so much money to be made in “allocating capital.” But we’re suspicious. We don’t even know what allocating capital is. How is it different from helping the fool part company with his money? Is it what you do when you entice speculators into Google at 117 times sales and 350 times earnings?
Well, get it while you can. And enjoy it as long as it lasts. These bonuses will probably disappear, too, along with all that other wonderful money from the housing bubble.
Realtors in California, stockbrokers in New York, car dealers in London — a lot of very nice people have made their fortunes as assets took on air. Shame it has to disappear some day.
People who have been walking on water are going to have to learn to swim.
• We got rid of our apartment in Paris. It made no sense to continue paying rent in one city when we live in another one. So, instead of going home, last night we stayed in a little rental unit down in the heart of the Latin Quarter.
How we would have loved to have this place 20 years or 30 years ago! If only we could have afforded it then. The apartment is only a few paces from the Pont des Arts. On the other side of the river is the Louvre. It is the kind of romantic pied a terre people dream about, with beams on the ceiling and an antique stone fireplace. We dreamt of it ourselves…of cafes and brasseries…and walks along the Seine…
But now, the romance seems to have gone out of it. We notice the paint that needs to be touched up, the plumbing that needs attention, and the stains on the carpet. “We should get rid of this place,” we tell Elizabeth.
Last weekend, we walked around in London and came upon a Harley Davidson dealer on Fulham Road. We were drawn over to the gleaming chrome like a kitten to a bowl of milk. Many years ago, we road a motorcycle — a BSA. Most readers will not recognize the name. BSA, a British-made motorcycle must have gone out of business decades ago. And so many years, say between the age of 19 and 39, we dreamed of buying a Harley, but we could never afford it. We liked the idea of cruising around on a big bike, the wind in our hair, bugs in our teeth.
We remembered our poor Aunt Jacqueline. All her life she dreamed of living in France, the country of her ancestors. Sitting on the porch of our house in Maryland, looking out over the tobacco fields, she would tell us about her visits to France…about the cafs…the artists…the museums…and about our French forebears. She loved the place from afar. But when we finally took her to live with us she was already 80 years old. It was too late. She had forgotten why she liked the place so much. The thrill had gone out of it.
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis.