About Cutting, Pasting and Copying

A commenter just posted a very long and thoughtful piece about the housing recovery and housing economics. It was so long and thoughtful that I questioned whether someone sitting at their computer typed it out in a response flurry. So I copied a paragraph into Google, and lo and behold, it was an article written by Charles Hughes Smith. Here's the link to it:

http://www.bearmarketinvestments.com/16253

I did not release the comment post on this blog because the poster didn't write it, he copied someone else's article without attribution. That's a copyright violation. Even with attribution, copying and posting a whole article without permission is still a copyright violation.

It's fine to link to another article, and even pull a quote or two to lead into the link. But please try to avoid copying whole articles into a post. Thanks.

Comments

[Nick]

Interesting link. There's some fatally flawed thinking there though. He says bubbles never reoccur, citing Tulips. Housing and tulips are not good metaphors for each other though. Housing is a needed good. There have been dozens of rallies in real estate, oil, the stock market, and plenty of other things over hundreds of years. Real estate bubbles are in fact so common you can name dozens just from memory. Texas in the 1980's and Florida in the 1920's are two of the most famous. I mean really -- there's an entire professional sports team named after a real estate bubble, think about it.*

Bubbles return all the time, and housing could have another. Maybe not soon, but that argument is silly.

And the second strange observation is that both inflation and deflation are both really harmful to housing. That's just logically impossible, unless you propose that the only good thing is for the price level to always stay roughly the same. In the example of why inflation is bad for homeowners he completely ignores that when you have a mortgage inflation basically makes your loan balance smaller and smaller in real terms. You can't talk about inflation and homeownership without ignoring that most homeowners are holding the majority of the purchase price as debt on fixed rates. Inflation is GREAT for those people. It's the equivalent of borrowing $100 and only having to pay $20. But oddly, he does have this concept figured out, as he explains clearly in the next entry how deflation can be devastating, because of mortgage debt.

Well exactly. Deflation is a problem if you have a lot of debt. Conversely inflation is great if you have a lot of debt. How strange.

I agree with the basic idea, I personally don't believe there will be another housing bubble like the one we just had for at least a generation, if ever. But that's just because there will be no choice but to fix lending standards that got completely broken, which I consider the basic cause of the bubble. It's not all that complicated. And if history is any guide, there absolutely will be a wildly speculative bubble in housing and property again, in this country, sooner or later. They always come back around eventually, only question is how long it'll take and if any of us will still be around to see it.

* PS: It's the San Francisco 49ers by the way

[compo]

I only spent limited time on the bear market site reading the link above but it appears to me that this is a half empty doomsday type site. First of all, I do not think anyone can say with a straight face that the real estate market is going to return to its pre-crash valuations anytime soon. What we are hoping for is stabilization over the next year and then some modest increases in valuations a few years out. Perhaps it will go back to its traditional growth pattern along with inflation.

Secondly, comparing the real estate bubble to the tulip craze and dot.com bubble is ludicrous. The NASDAQ Composite rose from 329 points in October 1990 to 4,696 points in February 2000. That is a 1,327% increase over 10 years. How many real estate markets experienced that type of increase? Of course it will take many, many years for the NASDAQ to retrace its peak. That would require a 185% increase over today's close.

I live in Forest Hills Queens which is a very nice area in Queens. I purchased my Co-op in 2000 and it essentially doubled to the peak. Prices were a little lower before I purchased but they did not triple in this area. My brother lives on a lake in Orlando, FL and his house amost tripled to the peak. I am not as familiar with Las Vegas or some of the other bubble areas but let's say they went up 300% - 400%. That is way off the 1,327% NASDAQ increase.

Anyway as I said doomsday types are in vogue now.

[Baysider]

Nick,

Inflation does lessen the burden of debt obligation and deflation makes it worse.
However, inflation and deflation are both problematic to depreciating housing markets. Remember, deflation is not depreciation and inflation is not appreciation. These terms are commonly interchanged and misunderstood. In a depreciating housing market, deflation will kill the housing market as cash becomes king and during inflation, as in 1976-1980, it does nothing but merely inflate the home relative to surrounding indexes but it doesn't ever appreciate homes during inflationary times, ie bubble.
If you look at housing graphs, you will see a huge spike in prices b/w 1976-1980. You would think there was a housing bubble in those 4 years. There wasn't. They inflated parallel to all other products and services. In fact, interest rates were so high that housing was in a bear market between 1976-1980!!

Remember, a bubble is a bubble when there is sudden appreciation in an asset relative to other assets...like a 1967 corvette vs. a 1994 ford explorer. During deflation, everything is killed but during inflation, both rise but do not bubble. It's difficult to assess bubbles during inflation b/c everything is increasing.

[keith]

The topic of copyright violation via copy/paste from text available on the web came up here at work. I mentioned articles from New Yorker website that were made available to everyone, not just subscribers. A coworker said it was okay to copy/paste the article because the magazine did not make people pay to see it. Not true, if the New Yorker subsequently changes it's mind about public access, they can either pull the link down or restrict access to subscribers. But they can't "unpaste" the text from people's email messages. If there's something I really want to share that not everyone can access on the web, I'll just restate the content of the article in my own words. That is legal.

[cfranch]

Inflation and deflation have different effects depending on where we are in a housing cycle. Right now housing is falling and becoming more affordable but if we have inflation and interest rates rise housing becomes less affordable and prices will have to fall further. Considering all the money the Fed is pumping into the system one has to be wary of inflation.
Deflation at this point in the cycle will probably not move prices either way as they have fallen a great deal.

[Jason Born]

I visit this website all the time, because it has organized content from many sources. If you took a good look you would have seen that it's a news aggregator, which generates content from RSS syndication. All of the major search engines aggregate content from millions of websites. The purpose of RSS syndication is to have other websites syndicate your content. That is the spirit of the internet.

If webmasters burn their names into the feeds they will have attribution. If a website has an RSS feed available it's usually an invitation for other websites and search engines to syndicate their content. It's up to the webmaster supplying the RSS feed to include syndication restrictions in writing next to the feeds.