I’m having Deja Vu, the scenario is Temecula, circa Feb 07, both the waitings (patient and bottom) are debating about the “when,” the neat thing is that nobody is even concerned about the “if.” Waiting, I felt the same way, prices fell in a few examples of 25-30% but each property had it’s downfalls yet it started to come in line with rent and I feared that was the true measure of “value.” I made bets with people about finding 50% off, many said it would take 3-5 years, I knew I wouldn’t wait that long, well, it took about 8 months and not jumping in while it continues to fall is quite empowering. So don’t rule out late 08, this meltdown is on steroids and SEH is late to the party so it’s going to have to take a couple of jagermeister shots to catch up. Once the trend moves down and the breakthrough prices show up, the snowball has started, distress sets in, people can’t refi, arms adjust, economy and incomes fall for some, jobs get lost and there are no buyers willing to save them so the banks get the houses. When no buyers show up for the REO’s they get desperate and begin the race to outprice each other. While this is going on people still lose jobs, get divorced, transfer, etc. and they find they are upside down and they just add to the snowball. If they try to price it what they need they look silly. The reason SEH will fall fast is that the banks have been softened up with body punches for three rounds by the other areas, the herd has been listening to the media, it’s a lot easier to follow the trend as opposed to setting it. Don’t argue about it, make a game out of it. Start throwing down the gauntlets, wager cocktails on the first 50% off sighting because “if” is no longer the question.
Time for a new theory now that I am in the third stage and you guys are just about to enter the second. just like there various mental stages of grief or trauma, there are mental stages for buyers in a housing meltdown.
Stage 1-prices begin to fall 5-10%, rates are good, so you do the math and say “I can almost afford the house I can tolerate if priced will just fall another 10% and rates hold.”
Stage 2-prices begin to fall in some instances 20-30%, you do the math and say “I can actually afford this house that I would be happy with, it’s not much more than rent when I factor the tax deduction, this might be it because this is the better neighborhood and you have to pay for things like that.”
Stage 3- you see 30-50% accross the board, the good and the bad, most homes for sale are vacant, every street has at least one reo and even reo’s have 180 days on market and weekly price downgrades, you say “I am going to have money coming out of my ass, rather than buy twice the house I’ll buy a house and have car payment-like mortgage,I am going to buy what I want, pay less than I ever imagined, the drinks will always be on me and I wont even feel it, I waited, I rented, I researched, I did the heavy lifting and now I am going to name my cat Mr. Bigglesworth and rule the world lile Dr. Evil.”
Study stage two but don’t get caught up in the hype of it, stage three will come young skywalker.
