Submitted by patientrenter on December 19, 2007 - 10:46pm.
Last downturn in CA started in 1989-90 and went to 1996-7, or about 7 years from peak to bottom. This time, the peak was 2006 for OC, perhaps 2005 for SD, so maybe 2012-2013 is a reasonable guess.
Submitted by Cow_tipping on December 20, 2007 - 10:14am.
My thought is, if it doesn't bottom till 2012-13, it will not bottom till 2050 or so. Because "retiring baby boomers dumping their build in the 70's shitboxes filled with lead and asbestos to 'fund their retirement' will effectively make a house worthless"
However, that really applies to places that have opressive weather - like Minnesota, insane retiree taxes like CA etc etc ...
But if you think about it, SD and LA may have the retirement thing going for them, OK weather, available under class to do jobs they cannot, and I know commutes and smog are crazy, but lets face it, retirees wont be doing commuting. Essentially if its a retiree magnet, and doesn't have a large pool of aging homeowners (who'd be dying) it can be OK after 2015. I however believe they will first try to sell and get out to New Mexico or somewhere where they can live off the $$ form sale of the house.
Anyway, 2012 for recovery, or 2050 is going to be the trend for most of northern US. Does CA buck the trend, IMHO, too close to call. Is CA northern or southern ???
Cool.
Cow_tipping.
Submitted by Alex_angel on December 20, 2007 - 1:18pm.
I took a crap this morning and asked and it said "not anytime soon" I think my crap knows more about the future than this author or anyone that posts predictions here.
Submitted by esmith on December 20, 2007 - 1:32pm.
This time is different from the 90's. 90's boom was a period of rapid appreciation (10-20% per year) followed by a slow decline (5% per year). This time seasonally-adjusted Case-Shiller graph looks almost symmetric.
Submitted by kev374 on December 20, 2007 - 2:09pm.
The decline so far has been severe. In the last year alone list prices have come down drastically. See my other post about the 2200sqft SFR in upscale Anahiem hills for $500k. This would've sold for $650k at least during the peak, so we're talking 23% instant REBATE! And even at these reduced prices, these homes are NOT selling. And god knows we have soooo much CARNAGE ahead of us yet to come!
I took a crap this morning and asked and it said "not anytime soon" I think my crap knows more about the future than this author or anyone that posts predictions here.
That's interesting, but what I really want to know is if you have made any progress predicting when your next crap will be. Once you get that down, maybe you'll understand this whole housing market prediction thingy. Gotta go .... in ... 5 ...4 ....3 ....2 .... 1.
Submitted by cooprider on December 20, 2007 - 4:21pm.
It cracks me up whenever someone predicts how long the downturn will last, Alex comes out of the closet with senseless comments insinuating that our data-based estimations are as out of whack as he is.
I personally think 2012-2013 is conservative.
Both of the last downturns went as far, and long as they went up. We've been going up since 1996, around 200%.
People think it's insane that prices could drop 50% or more, but it's just as insane that they went up as much as they did. They fell that far and for that long before, why wouldn't they now? Particularly with retiring baby-boomers as TC said (haven't seen you in a while BTW Cow, wb) the tightnened lending standards, the $1 Trillion in loans still to reset, and the coming recession.
Submitted by esmith on December 20, 2007 - 5:13pm.
Here's my theory.
Typical deflation period of a speculative bubble is 3 years. That's approximately how long it took NASDAQ to deflate (Feb '00 to Sep '02). That's how long it took DOW to deflate in the beginning of the Great Depression (Jul '29 to Apr '32).
Entry-level houses don't form extended bottoms. People get married and have kids all the time. Demand from new homebuyers is always there, as long as the price is right. Unlike in the 90's, we'll have a lot of must-sell supply from all the foreclosures. Low tier will quickly fall to 2001-2002 prices and switch to modest growth as soon as early 2009, in accordance with the 3-year rule.
Coastal/move-up market is in more trouble. Demand for move-up houses will progressively get worse. People who bought in 2003 and later will not be in any shape to move up. Many will get foreclosed upon and end up locked out of the housing market for a few years. In 2009-2011, 5/1 and neg-am ARM resets will flush the remaining holdouts.
Massive numbers of foreclosures will occur throughout 2008. After the foreclosure, you have to wait 3 years before you can get a FHA loan. In 2011 we will see a surge in demand from people who abandoned their houses in 2008 and chose to rent rather than leave the state.
Submitted by vizcaya on December 20, 2007 - 5:26pm.
Everyone has thier own way of predicting the bottom. I think it depends on the house,location, and inventory
My Method of predicting the bottom, is calculated using the following method:
My recent house was built in 1993, and sold for $200k. I assume a 3% increase appreciation per year. As of January 2008 the house should be priced around $290(with no real improvements added). The houses around me are currently being advertised at a average of $400k. The homes that have sold fast(bank owned fixers) have been priced at $350k.
In my neck of the woods, the bottom will be when prices come down to $300-$330. Not sure when that will be though. But thats the target price for me.
Submitted by patientrenter on December 20, 2007 - 8:40pm.
First, let me say I'm guessing, and we all are, really. And it's all a bit pointless, except as entertainment, because if you believe it will take at least 3 years to get near the bottom, then you're not going to be acting (buying) any time soon. Planning the exact date of a home purchase more than 3 years out is.... sick!
Many on this board are, frankly, a little desperate to buy a home at a price they can afford, and for many that needs to be a price near the bottom of a cycle in what seems to be an incredibly inflated market. I am in this category, so I understand the sentiment.
If you are desperate to buy, but only willing to pay a price that can be achieved near a true CA market bottom, then you'll really, really want the market bottom to come earlier than your logic will tell you. To quote Rusty, I'm just sayin'.....
It's just too hard to be real precise about it. Back in 2000, I guessed to my friends that 2008 would be in a downturn, and the first real opportunity to buy again. I was just using the length of prior cycles as a guide. In 200, I didn't see the hyper-boom of 2003-2006, driven by cheap high-risk loans, coming. I think it extended the last cycle by about 4 years, and an extra 50-100% price increase. So that extra hyper-boom air has to come out of the system now, on top of the pre-2003 normal cycle extra air.
Given that this last cycle was an unprecedented hyper-boom, how will that make this home price deflation cycle different? We don't know, but the initial downturn has been sharper than in previous, more normal, cycles. This cycle is so big that government has intervened, and will intervene more (only on the way down, of course!). We have a longer way down to go this cycle, but we're going faster. For what it's worth, my guess is it might take about the same total time to the bottom. But an extra 1-2 years isn't out of the question, which would take it out to 2013-2015. (This is the bottom, not the visible recovery when everyone can finally see it, which might be 1-2 years later.)
Submitted by paramount on December 21, 2007 - 12:13am.
I have been hearing in the mainstream media (this week) that mid 2008 should be the bottom of the market - but that could just be NAR marketing disguised as news.
One thing that has to be considered is population growth, which in Southern California still seems explosive.
I think the 2008 prediction is based on the lower number of foreclosures forecast (by some, Ex.: Jerry Siegel) in 2008.
I agree with a previous poster - downturns on average last around 36 months or so (based on what I have read).
My personal time line:
End of 2006: Start seeing weakness in the market
2007: Prices decline significantly
2008: Repeat of 2007
2009: Repeat of 2008
Sometime during 2010 prices stabilize
Total Price Decline: I would say around 30% from the peak on average.
So, if you had a house that was worth 400k at the peak, I would look for that same house to decline to ~280k.
Following that, I would look for an average of 3% in year-over-year appreciation.
Submitted by Fearful on December 21, 2007 - 8:03am.
We are a long, long way from the bottom. People are still talking about real estate as a good long term investment. I saw this posted just today, elsewhere:
----
I'm good with real estate for now... Have over half a million in three mortages for two condos. If I can ever sell my Encinitas rental I'll buy another downtown unit. Prolly also finish getting my brokers license at that point.
What I always try to remember is that during the past bust I was waaay to optimistic about when the market would turn. During the 90s I called the bottom 2 years early, and then I repeated that mistake by (privately) calling the subsequent peak 2 years early. I'm done with making that mistake.
The only reason I am confident it won't turn prior to 2010 is because of the current overhang in inventory, the tightening of the credit markets, the resetting arm schedule, and the prevailing market psychology. From where we are right now, this boat is too big to turn around in less than 2 years.
Submitted by sdrealtor on December 21, 2007 - 9:18am.
Maybe Bugs can confirm this but my recollection was that the majority of purchases between 2003 and 2005 in the coastal areas among prime buyers was 5/1 arm's with rates in the 3 to 4% range. It should take a year or two for the pain to sink in as many of these folks have ample reserves. I believe 2011/2012 is the right call for a bottom.
Submitted by vizcaya on December 21, 2007 - 10:25am.
Paramount I used the same numbers/assumptions of when the bottom would be, while placing bids back in July
You said:
Total Price Decline: I would say around 30% from the peak on average.
I used this percentage(30%) when I placed bids on a bank owned homes the wife and I liked.
The home we went with was sold at peak for $570k in 2005. I placed a bid on it for $420k(about 26% below peak). The bank accepted. Since the drop from peak was close to my assumptions of when the bottom would be, we bought now instead of waiting a couple of years till the bottom.
Looking at the market now, I still believe that my house will drop another 10% before it hits bottom. Which would be a 40% drop from Peak. Therfore It looks like my house which sold at peak for $570k in 2005, should be worth approx $350k by 2011.
Ouch!
Submitted by The OC Scam on December 21, 2007 - 10:28am.
Come on lets be real here! There are so many freck'n idiots out there like Alex that if you give them a credit card they will use it! if you give a loan they will take it!
Who checks the fine print anymore? No one
I need it now!! Give a me house, Give me the car I want, Give me, Give me, Give me!!!
Look at the spending report just out today....people are buying sh*t like crazy...
Has income gone up very much? NO
But debt has and will continue....
Responsibility doesn't exist for the majority.... If the banks and the Feds come up with another way to exchange debt with different debt then the bottom will be a little pot hole ....and they will ...um yeah thats right its called inflation!
Americans will just have to get use to follow:
1.paying 3000k + a month for a home, having second jobs, low interest rates to encourage more debt, 4 dollar a gallon milk, 9 dollar a gallon gasoline etc...Etc...
But did anyone see those Subprime loans taking off in 2004? B of A did? They decided Not to give them out but rather invest their customer’s money in it and encourage investment in BAD debt...the rest of the world fell in LOVE with our subprime crap
How about SIMprime loans in 2010? Super Impossible loans for the sucker. Maybe it time to change child labor laws so the American family can survive like the other third world country do?
The bottom is already here it called DENIAL!!!
You know what ALEX has something with the crapper and I'm joining him your crap says a lot about you about time we start looking at it more
Submitted by FormerSanDiegan on December 21, 2007 - 11:08am.
I predict that those who expect a pricing bottom in 2009, 2010, 2011, and 2012 may all be correct.
It will happen in different areas and different market segments at different times. Also, the bottom of the cycle typically results in very stagnant prices.
That said, I think there will be plenty of good buying opportunities starting as soon as late 2008 or 2009, and continuing for several years depending on the area and market segment.
Submitted by lonestar2000 on December 21, 2007 - 1:51pm.
Interesting graphs esmith.
In the 1990 housing bust the high tier fell quite a bit faster and than the low tier, and eventually evened out.
In this bust they seem to be doing the opposite (so far).
If memory serves, the 90s bust was job related, whereas this one is speculation/investment/lax lending related. It is interesting to see how this affects the downturn differently than the previous one.
Last downturn in CA started in 1989-90 and went to 1996-7, or about 7 years from peak to bottom. This time, the peak was 2006 for OC, perhaps 2005 for SD, so maybe 2012-2013 is a reasonable guess.
Patient renter in OC
I tend to agree.
JWM in SD
"This time, the peak was 2006 for OC, perhaps 2005 for SD, so maybe 2012-2013 is a reasonable guess."
It's plausible.
My thought is, if it doesn't bottom till 2012-13, it will not bottom till 2050 or so. Because "retiring baby boomers dumping their build in the 70's shitboxes filled with lead and asbestos to 'fund their retirement' will effectively make a house worthless"
However, that really applies to places that have opressive weather - like Minnesota, insane retiree taxes like CA etc etc ...
But if you think about it, SD and LA may have the retirement thing going for them, OK weather, available under class to do jobs they cannot, and I know commutes and smog are crazy, but lets face it, retirees wont be doing commuting. Essentially if its a retiree magnet, and doesn't have a large pool of aging homeowners (who'd be dying) it can be OK after 2015. I however believe they will first try to sell and get out to New Mexico or somewhere where they can live off the $$ form sale of the house.
Anyway, 2012 for recovery, or 2050 is going to be the trend for most of northern US. Does CA buck the trend, IMHO, too close to call. Is CA northern or southern ???
Cool.
Cow_tipping.
I took a crap this morning and asked and it said "not anytime soon" I think my crap knows more about the future than this author or anyone that posts predictions here.
Alex-angel: You are as full of turkey as a Christmas crap! :)
This time is different from the 90's. 90's boom was a period of rapid appreciation (10-20% per year) followed by a slow decline (5% per year). This time seasonally-adjusted Case-Shiller graph looks almost symmetric.
The decline so far has been severe. In the last year alone list prices have come down drastically. See my other post about the 2200sqft SFR in upscale Anahiem hills for $500k. This would've sold for $650k at least during the peak, so we're talking 23% instant REBATE! And even at these reduced prices, these homes are NOT selling. And god knows we have soooo much CARNAGE ahead of us yet to come!
I took a crap this morning and asked and it said "not anytime soon" I think my crap knows more about the future than this author or anyone that posts predictions here.
That's interesting, but what I really want to know is if you have made any progress predicting when your next crap will be. Once you get that down, maybe you'll understand this whole housing market prediction thingy. Gotta go .... in ... 5 ...4 ....3 ....2 .... 1.
AHhhhhhhhhh.
It cracks me up whenever someone predicts how long the downturn will last, Alex comes out of the closet with senseless comments insinuating that our data-based estimations are as out of whack as he is.
I personally think 2012-2013 is conservative.
Both of the last downturns went as far, and long as they went up. We've been going up since 1996, around 200%.
People think it's insane that prices could drop 50% or more, but it's just as insane that they went up as much as they did. They fell that far and for that long before, why wouldn't they now? Particularly with retiring baby-boomers as TC said (haven't seen you in a while BTW Cow, wb) the tightnened lending standards, the $1 Trillion in loans still to reset, and the coming recession.
7-10 years, 2000-2001 prices.
Keep staring at your crap Alex.
"This time, the peak was 2006 for OC, perhaps 2005 for SD, so maybe 2012-2013 is a reasonable guess."
No, I'd say 2010-2011 is when we're gonna see 1998-1999 prices again.
Here's my theory.
Typical deflation period of a speculative bubble is 3 years. That's approximately how long it took NASDAQ to deflate (Feb '00 to Sep '02). That's how long it took DOW to deflate in the beginning of the Great Depression (Jul '29 to Apr '32).
Entry-level houses don't form extended bottoms. People get married and have kids all the time. Demand from new homebuyers is always there, as long as the price is right. Unlike in the 90's, we'll have a lot of must-sell supply from all the foreclosures. Low tier will quickly fall to 2001-2002 prices and switch to modest growth as soon as early 2009, in accordance with the 3-year rule.
Coastal/move-up market is in more trouble. Demand for move-up houses will progressively get worse. People who bought in 2003 and later will not be in any shape to move up. Many will get foreclosed upon and end up locked out of the housing market for a few years. In 2009-2011, 5/1 and neg-am ARM resets will flush the remaining holdouts.
Massive numbers of foreclosures will occur throughout 2008. After the foreclosure, you have to wait 3 years before you can get a FHA loan. In 2011 we will see a surge in demand from people who abandoned their houses in 2008 and chose to rent rather than leave the state.
Everyone has thier own way of predicting the bottom. I think it depends on the house,location, and inventory
My Method of predicting the bottom, is calculated using the following method:
My recent house was built in 1993, and sold for $200k. I assume a 3% increase appreciation per year. As of January 2008 the house should be priced around $290(with no real improvements added). The houses around me are currently being advertised at a average of $400k. The homes that have sold fast(bank owned fixers) have been priced at $350k.
In my neck of the woods, the bottom will be when prices come down to $300-$330. Not sure when that will be though. But thats the target price for me.
Housing in SoCal will bottom sometime after nuclear 9/11.
I don't know when it will bottom out but I do know when it won't bottom out: 2008-2009.
First, let me say I'm guessing, and we all are, really. And it's all a bit pointless, except as entertainment, because if you believe it will take at least 3 years to get near the bottom, then you're not going to be acting (buying) any time soon. Planning the exact date of a home purchase more than 3 years out is.... sick!
Many on this board are, frankly, a little desperate to buy a home at a price they can afford, and for many that needs to be a price near the bottom of a cycle in what seems to be an incredibly inflated market. I am in this category, so I understand the sentiment.
If you are desperate to buy, but only willing to pay a price that can be achieved near a true CA market bottom, then you'll really, really want the market bottom to come earlier than your logic will tell you. To quote Rusty, I'm just sayin'.....
It's just too hard to be real precise about it. Back in 2000, I guessed to my friends that 2008 would be in a downturn, and the first real opportunity to buy again. I was just using the length of prior cycles as a guide. In 200, I didn't see the hyper-boom of 2003-2006, driven by cheap high-risk loans, coming. I think it extended the last cycle by about 4 years, and an extra 50-100% price increase. So that extra hyper-boom air has to come out of the system now, on top of the pre-2003 normal cycle extra air.
Given that this last cycle was an unprecedented hyper-boom, how will that make this home price deflation cycle different? We don't know, but the initial downturn has been sharper than in previous, more normal, cycles. This cycle is so big that government has intervened, and will intervene more (only on the way down, of course!). We have a longer way down to go this cycle, but we're going faster. For what it's worth, my guess is it might take about the same total time to the bottom. But an extra 1-2 years isn't out of the question, which would take it out to 2013-2015. (This is the bottom, not the visible recovery when everyone can finally see it, which might be 1-2 years later.)
Patient renter in OC
I have been hearing in the mainstream media (this week) that mid 2008 should be the bottom of the market - but that could just be NAR marketing disguised as news.
One thing that has to be considered is population growth, which in Southern California still seems explosive.
I think the 2008 prediction is based on the lower number of foreclosures forecast (by some, Ex.: Jerry Siegel) in 2008.
I agree with a previous poster - downturns on average last around 36 months or so (based on what I have read).
My personal time line:
End of 2006: Start seeing weakness in the market
2007: Prices decline significantly
2008: Repeat of 2007
2009: Repeat of 2008
Sometime during 2010 prices stabilize
Total Price Decline: I would say around 30% from the peak on average.
So, if you had a house that was worth 400k at the peak, I would look for that same house to decline to ~280k.
Following that, I would look for an average of 3% in year-over-year appreciation.
We are a long, long way from the bottom. People are still talking about real estate as a good long term investment. I saw this posted just today, elsewhere:
----
I'm good with real estate for now... Have over half a million in three mortages for two condos. If I can ever sell my Encinitas rental I'll buy another downtown unit. Prolly also finish getting my brokers license at that point.
What I always try to remember is that during the past bust I was waaay to optimistic about when the market would turn. During the 90s I called the bottom 2 years early, and then I repeated that mistake by (privately) calling the subsequent peak 2 years early. I'm done with making that mistake.
The only reason I am confident it won't turn prior to 2010 is because of the current overhang in inventory, the tightening of the credit markets, the resetting arm schedule, and the prevailing market psychology. From where we are right now, this boat is too big to turn around in less than 2 years.
Maybe Bugs can confirm this but my recollection was that the majority of purchases between 2003 and 2005 in the coastal areas among prime buyers was 5/1 arm's with rates in the 3 to 4% range. It should take a year or two for the pain to sink in as many of these folks have ample reserves. I believe 2011/2012 is the right call for a bottom.
Paramount I used the same numbers/assumptions of when the bottom would be, while placing bids back in July
You said:
Total Price Decline: I would say around 30% from the peak on average.
I used this percentage(30%) when I placed bids on a bank owned homes the wife and I liked.
The home we went with was sold at peak for $570k in 2005. I placed a bid on it for $420k(about 26% below peak). The bank accepted. Since the drop from peak was close to my assumptions of when the bottom would be, we bought now instead of waiting a couple of years till the bottom.
Looking at the market now, I still believe that my house will drop another 10% before it hits bottom. Which would be a 40% drop from Peak. Therfore It looks like my house which sold at peak for $570k in 2005, should be worth approx $350k by 2011.
Ouch!
Come on lets be real here! There are so many freck'n idiots out there like Alex that if you give them a credit card they will use it! if you give a loan they will take it!
Who checks the fine print anymore? No one
I need it now!! Give a me house, Give me the car I want, Give me, Give me, Give me!!!
Look at the spending report just out today....people are buying sh*t like crazy...
Has income gone up very much? NO
But debt has and will continue....
Responsibility doesn't exist for the majority.... If the banks and the Feds come up with another way to exchange debt with different debt then the bottom will be a little pot hole ....and they will ...um yeah thats right its called inflation!
Americans will just have to get use to follow:
1.paying 3000k + a month for a home, having second jobs, low interest rates to encourage more debt, 4 dollar a gallon milk, 9 dollar a gallon gasoline etc...Etc...
But did anyone see those Subprime loans taking off in 2004? B of A did? They decided Not to give them out but rather invest their customer’s money in it and encourage investment in BAD debt...the rest of the world fell in LOVE with our subprime crap
How about SIMprime loans in 2010? Super Impossible loans for the sucker. Maybe it time to change child labor laws so the American family can survive like the other third world country do?
The bottom is already here it called DENIAL!!!
You know what ALEX has something with the crapper and I'm joining him your crap says a lot about you about time we start looking at it more
Ahhh MERRY CHRISTMAS!
I predict that those who expect a pricing bottom in 2009, 2010, 2011, and 2012 may all be correct.
It will happen in different areas and different market segments at different times. Also, the bottom of the cycle typically results in very stagnant prices.
That said, I think there will be plenty of good buying opportunities starting as soon as late 2008 or 2009, and continuing for several years depending on the area and market segment.
Seasonally adjusted Case-Shiller (basically, 12-month moving average)
sd1990
sd2005
Interesting graphs esmith.
In the 1990 housing bust the high tier fell quite a bit faster and than the low tier, and eventually evened out.
In this bust they seem to be doing the opposite (so far).
If memory serves, the 90s bust was job related, whereas this one is speculation/investment/lax lending related. It is interesting to see how this affects the downturn differently than the previous one.