A question about foreclosures in the 90s

[Werewolf]

General question: some people stated that there will be no V-shaped recovery in the SD market. Why is that?

Pros:
1) San Diego has a better diversified economy than in the mid 1990s. Rental vacancy is 3-5% by market. People still want to live here
2) Job loss/growth in the region looks decent compared to the nation
3) SoCal (SD included) seems to be the home of the home buyer/speculator with property values defying logic/standards for the nation. When was the last time home values were 3x income here?

Cons
1) Even now homes are unaffordable for many without existing home equity.
2) Rising gas and food costs effectively eliminate any cushion/savings towards a down payment

What did I miss?

[an]

I think the type of recovery we’ll get will greatly depend on the trajectory of the decline and how low it goes. If it falls another 50% in the next 3-4 years, it might cause a V shape recovery because even though the greater economy might not be spectacular, price would be so cheap that investor will have a great ROI.

[an]

I think the type of recovery we’ll get will greatly depend on the trajectory of the decline and how low it goes. If it falls another 50% in the next 3-4 years, it might cause a V shape recovery because even though the greater economy might not be spectacular, price would be so cheap that investor will have a great ROI.

[an]

I think the type of recovery we’ll get will greatly depend on the trajectory of the decline and how low it goes. If it falls another 50% in the next 3-4 years, it might cause a V shape recovery because even though the greater economy might not be spectacular, price would be so cheap that investor will have a great ROI.

[an]

I think the type of recovery we’ll get will greatly depend on the trajectory of the decline and how low it goes. If it falls another 50% in the next 3-4 years, it might cause a V shape recovery because even though the greater economy might not be spectacular, price would be so cheap that investor will have a great ROI.

[an]

I think the type of recovery we’ll get will greatly depend on the trajectory of the decline and how low it goes. If it falls another 50% in the next 3-4 years, it might cause a V shape recovery because even though the greater economy might not be spectacular, price would be so cheap that investor will have a great ROI.

[Anonymous]

“General question: some people stated that there will be no V-shaped recovery in the SD market. Why is that?”

Because the housing drop isn’t being caused by a recession, it is being caused by people being unable to afford homes at those prices. They are unable to afford them despite not losing their job, getting sick etc. They were able to prop themselves up for a short while with HELOCs, refinancing with cash pull-outs, savings and teaser rates but the game is now up.

EDIT:

If the market crashes harder than I think (say 50% this year), then we may see a V style recovery when money pours in to buy up good rental property. IMO, it will more likely follow the model of the previous housing bubble where we’ll see a drop, followed by stagnation in prices. While the stagnation in prices is actually a drop in the real price of homes there won’t be the psychological impact on most sellers of selling for a “loss”

[Anonymous]

“General question: some people stated that there will be no V-shaped recovery in the SD market. Why is that?”

Because the housing drop isn’t being caused by a recession, it is being caused by people being unable to afford homes at those prices. They are unable to afford them despite not losing their job, getting sick etc. They were able to prop themselves up for a short while with HELOCs, refinancing with cash pull-outs, savings and teaser rates but the game is now up.

EDIT:

If the market crashes harder than I think (say 50% this year), then we may see a V style recovery when money pours in to buy up good rental property. IMO, it will more likely follow the model of the previous housing bubble where we’ll see a drop, followed by stagnation in prices. While the stagnation in prices is actually a drop in the real price of homes there won’t be the psychological impact on most sellers of selling for a “loss”

[Anonymous]

“General question: some people stated that there will be no V-shaped recovery in the SD market. Why is that?”

Because the housing drop isn’t being caused by a recession, it is being caused by people being unable to afford homes at those prices. They are unable to afford them despite not losing their job, getting sick etc. They were able to prop themselves up for a short while with HELOCs, refinancing with cash pull-outs, savings and teaser rates but the game is now up.

EDIT:

If the market crashes harder than I think (say 50% this year), then we may see a V style recovery when money pours in to buy up good rental property. IMO, it will more likely follow the model of the previous housing bubble where we’ll see a drop, followed by stagnation in prices. While the stagnation in prices is actually a drop in the real price of homes there won’t be the psychological impact on most sellers of selling for a “loss”

[Anonymous]

“General question: some people stated that there will be no V-shaped recovery in the SD market. Why is that?”

Because the housing drop isn’t being caused by a recession, it is being caused by people being unable to afford homes at those prices. They are unable to afford them despite not losing their job, getting sick etc. They were able to prop themselves up for a short while with HELOCs, refinancing with cash pull-outs, savings and teaser rates but the game is now up.

EDIT:

If the market crashes harder than I think (say 50% this year), then we may see a V style recovery when money pours in to buy up good rental property. IMO, it will more likely follow the model of the previous housing bubble where we’ll see a drop, followed by stagnation in prices. While the stagnation in prices is actually a drop in the real price of homes there won’t be the psychological impact on most sellers of selling for a “loss”

[Anonymous]

“General question: some people stated that there will be no V-shaped recovery in the SD market. Why is that?”

Because the housing drop isn’t being caused by a recession, it is being caused by people being unable to afford homes at those prices. They are unable to afford them despite not losing their job, getting sick etc. They were able to prop themselves up for a short while with HELOCs, refinancing with cash pull-outs, savings and teaser rates but the game is now up.

EDIT:

If the market crashes harder than I think (say 50% this year), then we may see a V style recovery when money pours in to buy up good rental property. IMO, it will more likely follow the model of the previous housing bubble where we’ll see a drop, followed by stagnation in prices. While the stagnation in prices is actually a drop in the real price of homes there won’t be the psychological impact on most sellers of selling for a “loss”

[EconProf]

BobS
Historically, V-shaped housing prices just have not happened. Not in the late 1970s runup, or the late 1980s runup, or the most recent one.
The reason is largely rooted in mass psychology–what Keynes called “animal spirits”. A buying frenzy needs to be fed by recent evidence that there is big money to be made by making the huge committment that buying real estate represents. That is why the upturn feeds upon itself–everyone can point to big profits all around them that they are missing out on unless they jump in. But consider the atmosphere at the bottom: everyone who bought in the last 3 years (or 4, or 5?) had their head handed to them. Real estate investing will be seen as only for the foolish. Renters will be the smartest guys in the room.
It is easy to say now that there will be lots of bottom-fishers to propel a quick rebound, but psychological factors explain why it seldom happens.

[EconProf]

BobS
Historically, V-shaped housing prices just have not happened. Not in the late 1970s runup, or the late 1980s runup, or the most recent one.
The reason is largely rooted in mass psychology–what Keynes called “animal spirits”. A buying frenzy needs to be fed by recent evidence that there is big money to be made by making the huge committment that buying real estate represents. That is why the upturn feeds upon itself–everyone can point to big profits all around them that they are missing out on unless they jump in. But consider the atmosphere at the bottom: everyone who bought in the last 3 years (or 4, or 5?) had their head handed to them. Real estate investing will be seen as only for the foolish. Renters will be the smartest guys in the room.
It is easy to say now that there will be lots of bottom-fishers to propel a quick rebound, but psychological factors explain why it seldom happens.

[EconProf]

BobS
Historically, V-shaped housing prices just have not happened. Not in the late 1970s runup, or the late 1980s runup, or the most recent one.
The reason is largely rooted in mass psychology–what Keynes called “animal spirits”. A buying frenzy needs to be fed by recent evidence that there is big money to be made by making the huge committment that buying real estate represents. That is why the upturn feeds upon itself–everyone can point to big profits all around them that they are missing out on unless they jump in. But consider the atmosphere at the bottom: everyone who bought in the last 3 years (or 4, or 5?) had their head handed to them. Real estate investing will be seen as only for the foolish. Renters will be the smartest guys in the room.
It is easy to say now that there will be lots of bottom-fishers to propel a quick rebound, but psychological factors explain why it seldom happens.

[EconProf]

BobS
Historically, V-shaped housing prices just have not happened. Not in the late 1970s runup, or the late 1980s runup, or the most recent one.
The reason is largely rooted in mass psychology–what Keynes called “animal spirits”. A buying frenzy needs to be fed by recent evidence that there is big money to be made by making the huge committment that buying real estate represents. That is why the upturn feeds upon itself–everyone can point to big profits all around them that they are missing out on unless they jump in. But consider the atmosphere at the bottom: everyone who bought in the last 3 years (or 4, or 5?) had their head handed to them. Real estate investing will be seen as only for the foolish. Renters will be the smartest guys in the room.
It is easy to say now that there will be lots of bottom-fishers to propel a quick rebound, but psychological factors explain why it seldom happens.

[Author]

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