San Diego Housing Bubble News and Analysis

I am not RE bull and obviously Meredith Whitney is smart and I respect her for the being right on the big call.

However I read the link and listened to CNBC interview and it was all about banks, their balance sheets and stock prices.

I only see following quote about house prices : "I think there is no doubt that home prices will go down dramatically from here, it's just a question of when.". There are absolutely no reasons listed in the article for that assertion.

How do you rebut an "analysis and thesis" which has not been made?

I certainly do not classify myself as a bull in any way, shape or form. I simply post about the conditions as I see them.

I would characterize the rally we have been in now to be approximately 7 months old. In that time we have seen pricing increases in several regions in the county depending on the type of home and of course the location. We do continue to see high end declines as that is a no brainer. In no way do I disagree that we will see housing take another decline however I have been consistent in saying that we need a catalyst.

Over the past 3 years the catalyst that drove prices down was simple, prices were just to high. Now one may say that the next catalyst is and should be unemployment. However as unemployment has indeed continued to shoot higher, despite our governments claims that the recession is over, AND that the government stimulus has prevented another million jobs lost, the strong real estate market persists.

So one thing that we would all agree on is that effectively the banks are insolvent right? I mean seriously there is not any argument here. Similarly we will see many more banks fail. What hurts even more is that there is no more secondary market for the securitization of loans. Actually this hurts banks more then anything. The CAPACITY of money they have to lend is drastically reduced if they cannot move loans. Okay we agree on that. There is just a small matter of our government. If you can tell me with 100% confidence that the government will sit by and watch it all happen and do nothing, then well... okay yes the whole stack of dominoes will fall. Maybe that will happen... maybe it will not.

I posted my change of heart a few weeks ago. I don't feel bullish about real estate. I feel like real estate is a carnival now. All glittering on the outside but you go behind the glitter and the inner workings look mighty f'd up. However it has been done the powers that be have been able to keep it afloat and then some.

Also yeah maybe it goes down 25% but in some areas it has already kicked back up over 10%.

*******

Again, my read is that the next major drop will be induced by interest rates. How that will manifest itself I am not sure. Maybe we get a slew of bank failures, then the govt or fed or treasury sinks a few more trillion into the system and china says screw you and the bond market tanks. Rates go up and boom, we get the market to tank bigtime. Will this happen in 3 months? 6 months? a year? I don't know but it seems logical to me that it will happen. I don't see the market up and running away and I think it may actually start to flatten out as there has been alot of sales that need to be digested. I am still kind of leaning to a guesstimate that things will stay in this twilite zone haze for another year or so.

Good post SDR.

Who is buying houses right now? Primarily 1st time buyers, hedge funds and foreign investors - very few move up buyers.

If housing prices rise it will be partially caused by inflation.

For 1st timers it is almost a no brainer - low interest rates, $8000 credit, prices up to 50% off from the peak - it's been a feeding frenzy. I have a feeling this frenzy is starting to fizzle out a bit though, particularly with the buying season winding down.

I'm not gonna say there are thousands of move up buyers but there are alot more than you think just not the way you think of them. I see plenty of buyers in the mid range ($450 to $800K) that never bought during the bubble but who are buying now that prices are donw. I see long time owners taking the opporetunity to move up with lower prices and keeping there pre-2000 purchases as rental properties. Lastly I see relatively high income young dual wage earners ($150K to $300K) that bought small homes during the bubble who can qualify for a nice new big house and then walk away from the other. On the other side of the equation I dont see a hell of a lotta quality inventory in the move up category.

I like Meredith, she's made some good calls, she's easy on the eyes, but she's not at oracle status just yet. Her big pick the cnbc video praised her for was goldman sachs, up what 10%, c'mon, I can do that, show me something I don't know, if she had picked citibank at theat time it would impress me as it has more than doubled, but then again she made her name by blowing the whistle on citi. She also married a professional wrester, recently. C- for judgment.

Meredith aside, ENRON is right, there is more in the headline of this thread about r/e than in all the linked info. I just watched a lengthy video and read a long article and the wki bio and 95% of it was not about R/E, when it was, there were lots of qualifiers and partial statements. I read her bio, she's never really spent time analyzing r/e, she kinda punked case-shiller in the interview, those boys are our rock stars, ease off or bring it with some supporting data. I just don't like it when someone dismisses a chart or indicator without explaining it in detail and without any number or percentages. She said something to the effect of: case shiller is up because of the loan mods, so ignore it cause they may not work. This would be a great time for a couple of supporting facts.

Maybe she will read this, this is the huge tip of the day. If you use a chart that goes in the direction you said it would or say it will, you don't need to back that up so much, the chart will suffice (ie, she says goldman will go up, the chart backs her up, she says it will still go up, since the direction is up, no argument from me).

But when you say that something will go down yet the chart shows it going up, you need to bring in twice the supportive info because you are asking me to not believe my lying eyes, it's posible to get me to believe something (I bought the shamwow, I swear I was drunk), but you need to talk me into it, facts work best.

This is what I'm trying to understand, sorry if it is a little OT (and honestly, I really am confused):

At my work mass layoff's continue, unemployment up across the country (12+% in California - I think the highest since it's been recorded) - it's considered a good month when only 210,000 people lose their jobs.

Consumers overall are tapped out, foreclosures still quite high, etc...I know there are other facets to the economy but still things aren't all that great as far as I can tell.

And yet...

Stock market up up up up up
Auto prices sticky
Gas Prices fairly high and rising
Even discretionary items like boats and RV's are priced high and never adjusted to the recession
Food prices generally high
Bidding wars on houses

I priced out a boat this summer and I got sticker shock. This and supposedly credit is still tight. And yet inventory still seems to be moving - they were not desperate to make a sale in any way shape or form (the boat dealer in SD).

It's like I live in another world - maybe I do...

Standard Pacific is selling homes at bubble level prices in Wolf Creek - from some of them you could throw a rock and hit the casino.

Price out boats and r/v's in winter, but for the rest of it, I think it may be just how you are looking at it. One of the oldest paintings(tapestry) is applicable, it's called "the vinegar tasters", buddha, confucious and lao tzu all tasting vinegar from the same pot yet all three have a different expression on their face. They were tasting the same vinegar, but they had a different attitude as they tasted it so they seemingling had different interpretations.

Some of your observations are correct, but most have an explanation, maybe not a justification but an explanation.

However, lots of things cost less and I believe food costs less. My experience seems to be completely different. Just last night I picked up some take out from pick up stix, they had a buy one get one free entree coupon in the mail, 25 cent wontons and dollar soup without the coupon, my tab for three people was under $20, it's usually over $40 for about the same stuff. Super walmart just opened by us, the food prices are fairly cheap and the other grocery stores keep lowering theirs, my tab has been going down. Flat screen t.v's and computers are way cheaper, labor, home improvement stuff, flooring, I've been pricing out some projects, all are less than they were five years ago. Two years ago, I would budget $10 a day for lunch, I can get by for $5 a lot of the time now.

-Houses are selling because they are cheaper
-Auto prices might be temporary as they are low on inventory from cash for clunkers, i think they got their future sales early and prices will fall, but then again they hadn't sold much for a while
-Boats and RV's always sell well in summer, but there is no excuse for them not to go down from here on out
-Stock market up from march but down from 14000, so it's up from it's lows and down from it's highs, it's medium.
-I'll give you gas, I thought we stole iraq's oil, when do we get that stuff?

How did this happen? Cheap and easy govt money, pumped out in the form of FHA loans, bank loans supported by FDIC guarantees, PPIP subsidies etc.....

TG: From what I understand the seven sister's wanted to keep the oil from Iraq off the market to maintain inventory levels.

http://en.wikipedia.org/wiki/Seven_Sisters_(oil_companies)

I think your right though it's a matter of interpretation but also one's personal circumstances. With all of the layoff's occurring at my work it feels like the sky is falling at times.

And I've been hitting up Wal Mart since they opened the grocery section and it is cheaper than the other grocery chains; I'm just not sure what the longer term costs will be.

Long-term costs as in good-paying union jobs lost because we all decided to buy our groceries at Super Walmart and Target Greatland?

Our grocery costs are definitely down; now maybe that's partly due to our aggressive couponing, but there's also been stories of grocery stores slashing prices on some items by 20 percent to 30 percent.

What about gas? A month ago or so I heard a report on the radio (KNX or KFI) that big oil had too much fuel on its hands and was paying to store it rather than flood the market. Eventually the companies would stop storing it and gas might hit around $2 again. I'm waiting.

God, every time I hear someone whelping about union jobs, I want to retch. Seriously. Unions have done more to destroy the competitive backbone of this country than nearly any other force.

GM went to wrack and ruin because of the unions (and, yes, completely inept management).

God, every time I hear someone whelping about union jobs, I want to retch. Seriously. Unions have done more to destroy the competitive backbone of this country than nearly any other force.

GM went to wrack and ruin because of the unions (and, yes, completely inept management).[/quote]

That's a historically new, revisionist, American and Anglo, corporate unproven theory in the campaign against organized labor. They've replaced the Pinkerton thugs of earlier America with lobbyists and subsidized lackey "think-tanks ".
Many EU countries have significant labor/union organizations,(reaching up to even white collar jobs), well above US levels.
Their economic performance even in this crisis, is much better than ours, and their societies are strikingly absent of an underclass, so persistent in the US.
Germany,not only the most productive economy of the world, but the biggest exporter, (yeah, bigger that Wal-China), has very high levels of union membership and influence in a cross section of its industries with wages matching and even surpassing US incomes.
As for GM, their "union" factories are more like sweatshops compared to German counterparts. Just visit BMW's Munich and Mercedes Stuttgart union plants,... I have.

I'm a Union Supporter in general (except for gov't employees) and yet I shop at Wal Mart. Hmmmm.

Unions are just another form of protectionism. Which is something corporate America is very good at as well.

"Lastly I see relatively high income young dual wage earners ($150K to $300K) that bought small homes during the bubble who can qualify for a nice new big house and then walk away from the other. "

This helps explain some things. I had a feeling that this was going on. These people are essentially going to a get a free do-over. Yes, there credit will sting for a few years but with all of the foreclosures going on, that stigma has been significantly reduced.

The only bubble buyers who are taking significant loses in CA are those who paid cash or put a large down.

I think those of us who believe in saving, paying lots of cash etc, are seeing activity occurring in the open and on a vast scale that we only suspected was occurring. What will that do to our future behavior?

Ravinos: Talk about throwing out an argument that's completely apples to oranges. Let's forget about Germany and it's manifold problems regarding underfunded pensions for a second(Ravinos, care to throw out how big the persistent overhang in German pensions is?), and focus on how German unions are organized and, even more importantly, how much influence they wield in the German political system. Far from being a clean, well-run system, Germany has significant issues confronting the country, not the least of which is the inability of its workforce to produce competitively.

As to this supposedly "new and revisionist" history, attached please find a link to a series of US Chamber of Commerce papers on the true "value" of unionization in America. Link: http://www.uschamber.com/publications/re...

Also, spare me the racism directed at my Anglo heritage, please. It doesn't have a place on this forum.

If you want to seriously examine underfunded pension liabilities, look no further than the huge hole the the Federal government's PBGC, (Pension Fund Guaranty Corp),agency is sinking into. Liabilities of American corporate pension plans are running into the hundreds of billions of promised benefit shortages and if they did a true mark at market accounting, instead of the actuarial hanky-panky, a big number of them would be insolvent.Bigger than Germany's obligations and even bigger that the FDIC.
And implying racism, because I categorize a corporate theory as "Anglo-American" borders on the paranoid. In fact, you probably used the below the belt racism slur because of my screen name, "Ravinos", assuming I was non-Anglo, but of Latin/Hispanic or Southern Europe/Mediterranean descent. I assure you, there's a good chance I'm more "Anglo", that you are, whatever that counts for in your world, as my father was born in Britain, my grandmother in Scotland and as a result hold dual citizenship, U.S.A./U.K.

God Save the Queen ! God Bless the Working Man !

Ravino: Given your ethnicity, I now stand even more fervently behind my racist comment. I'd be hard-pressed to imagine an empire quite as racist as the British Empire, which gave us "The White Man's Burden" and nearly all of the problems we as Americans are presently confronting in the world, whether we're talking about Afghanistan, Palestine, Pakistan and recently, the Balkans.

We also have the Brits to thank for complete ineptitude in the volatile mix of Labour policies and politics, intermixed with the disastrous decades of the 1960s and 1970s (remember the IMF bailing out England?). If this is the yardstick we're trying to emulate, well, no thanks.

I'm German on both sides of my family, and quite familiar with "Perfidious Albion". You might have noticed, but we Americans had to wage two separate wars to kick your confiscatory, monarchical and inbred asses out of North America.

"God save the Queen"? Really? I loathe everything she represents (Divine Right, anyone?) and boasting about 700 years of oppression isn't something I'd crow about.

Really?

Toyota and VW and BMW pay almost equivalent wages within a couple of
points.

Toyota and Honda and Daimler ahve reputations for quality because
they have poured serious money into quality.

Sure those UAW guys are shitheads, but their managers were worse.

Might want to peruse the lyrics first.

Pat: Which is why my quote specifically mentions the inept management.

For real shits and giggles, check out the GM "30 and Out" policy. It wrecked the company and gave birth to the joke that GM wound up as an insurance company that just happened to also build cars.

Add unions to clueless morons like Roger Smith and you put a world leading corporation like GM into the ditch.

Courtesy of the Sex Pistols:

"God save the queen her fascist regime
It made you a moron a potential h bomb !

God save the queen she aint no human being
There is no future in englands dreaming

Dont be told what you want dont be told what you need
Theres no future no future no future for you

God save the queen we mean it man (God save window leen)
We love our queen God saves (God save... human beings)

God save the queen cos tourists are money
And our figurehead is not what she seems
Oh God save history God save your mad parade
Oh lord God have mercy all crimes are paid

When theres no future how can there be sin
Were the flowers in the dustbin
Were the poison in your human machine
Were the future your future

God save the queen we mean it man
There is no future in englands dreaming

No future for you no future for me
No future no future for you"

SDR knows what he is talking about. Lots more people are buying then you think. The place next door to me in Carlsbad just put up the sold sign today. All I know is that a lot of places in Carlsbad are selling from what I can see with the naked eye.
I talked to a very solid guy today who sells in south San Diego. He is selling new properties in the $250 range and says that he can't keep inventory. He told me when one comes up he is getting 20 plus offers. He had no reason to lie to me. I don't sell homes, but I am interested to see what will happen. I don't think 7 years of house lust is going to go away. Everyone still wants a house and many are tired of waiting. If you don't think we could have another huge run up with no principals to match it, then you are high. We thought we were done with genocide after WWII, but that has not stopped either.

Still MPO

Exactly right. We need union power to conteract the corporate power, and vice-versa.

Not sure why any **working** person would be opposed to unions. That's not to say that there can't be some improvement, but unions are the only reason the middle-class exists, IMHO.

Everybody knows the game is fixed;
the poor get poor, the rich get rich

Finally a good thread, it was starting to get a little boring. I came to the realization tonight that one of the big problems with our system is that everyone lies when they advertise,and I mean everyone (or so it seems). You would think this would run counter to our judeo-christian coulture, but apparently not. I am pretty much getting sick of all the commercials, the bait and switch on Craigslist, and maybe it's starting to depress me. I have no reason to be depressed, I have a nice house,a job, a loving wife, a son that doesn't get into trouble (a teenager at that), I don't pay alimony or child support. Many people are smart, many are capable, but I'm coming to realize that few are ethical or morally conciounable.-Sorry for the rant, hope I didn't ruin the thread. P.S.- From April 1,1932 to July 1,1932 the DOW more than doubled.

You're twisting yourself into a pretzel..now you're of German heritage, but a day ago, as per your own words:
"Also, spare me the racism directed at my Anglo heritage, please. It doesn't have a place on this forum."
Again, a low blow and spurious argument because all I did, as documented by my post, is criticize an Anglo ECONOMIC theory.

Memo: German heritage/ethnicity is NOT Anglo...It's something else, I know what it is, you figure it out...maybe by your "we Americans", you're now a Native-American "Indian".
Obviously very ethnically sensitive and confused you are, indicated by your use of the term "inbred"....a word uttered by millions of... "pure" Germans.

Ravinos: Nope, you had it right the first time, regarding my reaction to the term "Anglos". I reacted due to the use of that term by Hispanics, and often in a pejorative sense.

"Pure" Germans? Ah, now you're playing the Nazi card, is that it? No joy there, either, Kitchener. My Grandma left Germany in 1935 to escape exactly that kind of nonsense. Not a "pure" German anyway, since that doesn't exist, except to idiots like Hitler, who wasn't even German.

As far as racial purity goes, you "Anglos" have us Teutons beat, hands down. I don't know if you hail from either the Stuarts or the Tudors (you mention both English and Scotch heritage), but the Royals in England have had a going concern as far as making money from racial warfare, oppression and tribal hatreds.

Interesting you didn't mention the "Saxon" part of Anglo-Saxon. We could open the door up to Queen Victoria's dirty little secret (and, no, I'm not talking about her relationship with Mr. Brown). Speaking of Queen Victoria: She definitely put the wood to the brown folks of the world during her tenure, didn't she? Perhaps her "dirty little secret" (from her mother's side) at work, eh?

While there is certainly plenty to be horrified at coming from a German heritage, you "pure" Anglos have done far more damage, and claimed far more lives, and for a far greater period than my folks have. It continues to this day and in places like the Balkans, and Palestine and Afghanistan and all over the continent of Africa. That British "Civilizing Mission" was truly something to behold, huh? Of course, I'm sure you're thinking "Where is Richard the Lion-Hearted when we need him most to deal with these fuzzy-wuzzies"?

Hey, do you want to tell the various readers about how the British invented the concentration camp?