– Sales volumes are down. YES
– Inventory is cyclical. yoy YES
– Lots of foreclosures are still ahead of us. PROBABLY
– The economy has a higher probability of slowing down rather then speeding up in the next 1-2 years. HARD TO PREDICT
So looking at those 4 basic statements do you agree or not with them? If you do agree with them, do you think housing prices will increase or decrease?” DECREASE (in the near term . . . next 6 months)
The following from Fortune Magazine mirror my sentiments about the current RE situation.
“Danger: Steep drop ahead
Even if the credit crunch passes without a major catastrophe, the prices of stocks, bonds and real estate have a long way to fall.
(Fortune Magazine) — Credit crises have always been painful and unpredictable. The current one is particularly hair-raising because it’s occurring amid the first truly global bubble in asset pricing. It is also accompanied by a plethora of new and ingenious financial instruments. These are designed overtly to spread risk around and to sell fee-bearing products that are in great demand. Inadvertently (to be generous), they have been constructed to hide risk and confuse buyers.
How this credit crisis works out and what price we end up paying has to be largely unknowable, depending as it does on hundreds of interlocking and often novel factors and how they in turn affect animal spirits. In the end it is, of course, the management of animal spirits that makes and breaks credit crises.”
SD R . . . would you not agree that
Asset bubbles and bursts are hugely influenced by the emotions of buyers and sellers?
That this emotional factor is inherently difficult to assess?
Very few people successfully time major turns in asset cycles?
Seeing beyond the emotion and focusing a variety of concrete factors is the only way of possibly divining when such turns in asset markets occur?
A weakening dollar combined with a global economic expansion outside of the US means that foreign buyers in the neighborhoods I want to buy in (Scripps, CV, 4S, etc.) make dramatic drops there less certain? How many foreign buyers have you assisted in those areas that 1) have the money (even more if their wealth was from non-US $ assets) and 2) largely ignore many of the finer economic points we banter about here and just buy because the like it, the schools are good, and their friends live there???
Stabilizing inventory always occurs as a leading indicator before any RE cycle turn?
In other words inventories stablize at the top, contract, eventually leading to a price rise. Or, they stablize at the bottom, expand, eventually lead to a price fall. I’m looking for early signals of a turn. Stablized inventories is one factor always preceeding a turn. We would have to have multiple other confirming factors (i.e. stablized sales, falling interest rates, absense of job losses, no recession, etc.) before a turn could occur however. I’m just keeping my powder dry and seeking feedback from persons such as yourself as to the the significance of what could, or could not, be an early leading indicator of a turn.
