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Source link: http://archive.mises.org/10128/no-one-really-knows-what-anything-is-worth-anymore/

“No one really knows what anything is worth anymore.”

June 12, 2009 by

“No one really knows what anything is worth anymore. Some sellers appear to be kidding themselves…”

So says David Whitford in this nicely detailed piece about real estate in Phoenix. Overall prices in Phoenix, by the way, are off 53 percent from the peak, and have seen the biggest decline in the nation.

There are some interesting contrasts in the piece. Notable is how at least some the over-70 crowd wasn’t caught up in the speculation and the bust. Those who are too old to be Baby Boomers weren’t taken in by the profligacy of that generation. Says one 73-year-old: “If you’re going to retire early, you can’t have a lot of wives you’re paying, you sure as hell can’t have kids in college, and you can’t have a lot of debt. You gotta get your debt down, get your bills paid, pay for your car. And then when hard times come, you don’t participate.”

I once had a Baby Boomer try to explain to me his theory of how it was smart to maximize mortgage debt for some reason or other. He probably won’t be retiring any time soon.

But what struck me here was the section on how prices are all over the map in Phoenix. “Some sellers appear to be kidding themselves…” says Whitford, and this is hardly peculiar to Phoenix.

It’s pretty clear that a great many sellers are still in denial about the current economic situation. And this includes banks who own foreclosed properties. Often, the banks are asking for the most ridiculous prices.

One real estate agent remarked to me recently that she has never experienced a time when people were so clueless about the true value of their homes. Banks will price foreclosed homes at 500K only to have them sell for 350K many, many months later. And this is in the relatively healthy market in Denver. Individual sellers aren’t much better.

But can we be surprised when we have economists like those at Wells Fargo who recently declared that there will be economic growth in the second half of 2009, and that the recession will be history by 2010? Many have already convinced themselves that the next boom is already in place.

{ 11 comments }

gilad June 12, 2009 at 11:00 am

Why should banks rush to sell when the government is trying to prop up prices? they are probably better off just observing to see what help comes next

matt June 12, 2009 at 12:45 pm

“But can we be surprised when we have economists like those at Wells Fargo who recently declared that there will be economic growth in the second half of 2009, and that the recession will be history by 2010? Many have already convinced themselves that the next boom is already in place.”
The first part seems logical especially considering there is sure to be some time gap before our illustrious government accountants realize (or confess) that we’re not enjoying “real” growth but inflation fueled nominal growth. maybe 2 quarters before they fess up and by then the recession of 2008/2009 WILL be history and instead we’ll have stagflation set in with a brand new recession. sounds like the wells fargo guys are right on!!!!!

matt June 12, 2009 at 12:46 pm

“But can we be surprised when we have economists like those at Wells Fargo who recently declared that there will be economic growth in the second half of 2009, and that the recession will be history by 2010? Many have already convinced themselves that the next boom is already in place.”
The first part seems logical especially considering there is sure to be some time gap before our illustrious government accountants realize (or confess) that we’re not enjoying “real” growth but inflation fueled nominal growth. maybe 2 quarters before they fess up and by then the recession of 2008/2009 WILL be history and instead we’ll have stagflation set in with a brand new recession. sounds like the wells fargo guys are right on!!!!!

David Spellman June 12, 2009 at 12:51 pm

When my grandmother died last year, my parents sold her house in Las Vegas for about one third of its assessed value to a seemingly ruthless investor. Recently my mother found out that the house is on the market for about one third of what they sold it to the investor for. Truly we live in interesting times.

angkasuwan June 12, 2009 at 2:04 pm

the tearing down houses approach might not be so bad.

J Cortez June 12, 2009 at 2:43 pm

angkasuwan: “the tearing down houses approach might not be so bad.”

The better approach would be to just let the prices fall.

Lower housing prices would mean more people in every income bracket would be able to buy.

Thomas Talionis June 12, 2009 at 2:50 pm

Everytime the government tries to manipulate prices it ends in disaster. Ex: Chavez thinks he can cap the price of commodities. The result: massive shortages.

Only free market, supply and demand can determine value. Not forced inflation a la FDR and/or Obama. Not subsidies, not legislation, etc.

happylee June 12, 2009 at 3:33 pm

With all this sad news about real estate, let’s have some fun by reading what Mr. Feldman, a local “sage” (in the Thomas Friedman sense of the word), believes is the ongoing “crisis” in affordable housing for people who can’t save enough money for a down payment. Ah, this made me chuckle. Gifted indeed is he who can subtract mightily from the collective store of knowledge and wisdom. Mr. Feldman is in a league of his own…he is a regular on NPR, killing off brain cells quicker than a Friday night Frat kegger – with no hangover!

happlee June 12, 2009 at 3:37 pm

Hey, hyperlink not working.

web address for sage of vegas commentary:

http://www.lasvegassun.com/news/2009/jun/12/affordable-housing-topic-still-relevant-despite-pr/

Bruce Koerber June 12, 2009 at 10:51 pm

The next boom is in place!

The problem is that the boom will occur simultaneously with the detonation of the bombs dropped by the economic terrorists who are overseeing the unConstitutional coup.

Mushindo June 15, 2009 at 4:45 am

This is the root cause of everything thats wrong, and not just in housing.

All government intervention in just about all sectors is effectively stopping assets from repricing honestly on the market. And when nobody knows what anythigns worth, nobody wants to buy or sell if they can possibly help it.

If you want to find out what GM is REALLY worth, put it on the auction block without inviting any government agency to bid. And then stand back and watch the buyers of its assets deploy them productively.

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