“Partypup, you write that you are “flabbergasted that the author thinks that a return to 2001 prices is out of the question.” I’m not certain who “the author” is in this case, but if you mean me (as the author of the post that started this thread), then I would point out that I said no such thing in my posts. I said that such predictions lack a foundation in the historical data.
You say that the situation we face is “completely unprecedented in the modern financial world” and that “Gauging the impact of the coming housing crash based on past downturns will be of no use this time.” So it seems that you consider the past data to be of little relevance.
Regardless of how relevant you think the past is, you should avoid making false statements about it, such as, “But prior to 2001, we had seen steady 5 – 7% appreciation.” Appreciation in San Diego was far from steady. Instead it showed considerable up and down swings. Here is the year-to-year average appreciation from 1987 to 2000 (from the Case-Shiller Index data):
Perhaps this downturn will be much worse than any prior one. Perhaps not. Either way, I can say with confidence that generalizations about impending economic collapse combined with falsities about historical appreciation are not going to convince me of it.”
Three points, Oak:
First, the author I was referring to was the assembler of data in the index;
Second, the 5-7% rate of appreciation I was referring to was based on my knowledge of Southern California real estate as a whole over the last 3 decades; it wasn’t limited to San Diego.
Third, even with respect to the data you supplied, taken over 13 years, I calculate an average rate of appreciation of 5.46%.
Fourth and finally, you have focused on one part of my post to the exclusion of what I believe to be the more important point: the unprecedented macroeconomic sword of Damocles hanging in precarious balance over the neck of the colective global financial community.
We can debate till the cows come home the finer points of San Diego housing data, the Case-Shiller index (for whatever that’s worth) and all manner and variety of real estate trivia. My fundamental point remains the same: this downturn will be deeper, longer and more frightening than any in recent or distant memory. The basis for that assertion has nothing to do with the data you cite, but rather with a fundamnetal understanding of the unwinding of the yen carry trade, China’s increasingly public reluctance to finance our debt, a brewing war that threatens to consume the entire Middle East, a recession looming in our rear view mirror, and a Federal Reserve caught between the Scylla and Charybdis of lowering interest rates to stave off a recession (thereby dooming the dollar) or raising interest rates to breathe life into the greenback (thereby dooming housing). These are all seismic financial events that have never happened before TOGETHER in U.S. history. We are, as they say, in uncharted territory.
The problem is so much bigger than San Diego, than California, than the U.S. The post-1971 global financial system that we have all come to know and love has been slowly unraveling for the past 30+ years. Now the unravelling has begun to accelerate — just as we are tipping into recession, just as geopolitical tensions are rising in a part of the world upon which we are dependent upon for our existence. Query: what do you suppose will happen when (not if) the U.S./U.K/Israel strike Iran? How resilient do you think the U.S. consumer and the equities market will be when faced with $80-$100/barrel oil?
We are facing a perfect storm of unprecedented magnitude. No previous housing downturn in U.S. history has ever occurred in the midst of so many disturbing and magnificently devastating factors. You can choose to focus on the “falsities” of housing data you think I have cited, but you are really missing the forest in your fascination of the trees. If I have made “generalizations about impending economic collapse”, please point them out. I believe I have only highlighted what any observer of macroeconomics knows for a fact: the days of the dollar and a bloated empire built on credit are quickly coming to an end. And when that happens, the housing market — yes, San Diego included — will never be the same.
