May 3, 2006 at 12:44 PM #6563
I spoke to a couple people who were there (I wasn’t) and got their take on it. Based upon what they said I think you could probably hear whatever you wanted to. I’d be interested to know PS’s take on it and will reserve comment until after she posts her executive summary. Oddly enough, all three mentioned a woman who inappropriately got up at the end and started telling her life story. I anxiously await her take and beleive what I heard from colleagues was probably impacted by their roles as a stakeholder just like her comments will be.May 3, 2006 at 1:04 PM #24929North County JimParticipant
Oddly enough, all three mentioned a woman who inappropriately got up at the end and started telling her life story.
In light of events on a recent thread, that’s probably a little gratuitous.May 3, 2006 at 1:11 PM #24930
Not really, just want to let you all know that PS defintely made her presence known…that’s all.May 3, 2006 at 3:16 PM #24932BugsParticipant
I’m sure if you were gracious enough to post a summary of your associates’ take on the material that would be sufficient to start a good discussion. Everyone who has something constructive to add can express their viewpoints from there. I see no advantage for either side of the discussion to assume the role of the visting team.
Who knows, maybe if we all play our cards right we might even be able to avoid another publicly embarrassing exchange here between the two of you.May 3, 2006 at 4:36 PM #24934
Here’s a summary I received from my broker today…if true it does not bode all that well for are the bubble beleivers. BTW, I beleive PS was told it was unlikely she will be able to buy her house back for 30 to 40% less than she sold for. Maybe she can clarify this as I wasn’t there. Article as follows……….
San Diego’s real estate market “will continue to slow along its current trajectory,” and “significant declines in home prices are unlikely” from 2006-08, according to an Anderson Forecast report.
Home sales activity in San Diego County fell 30 percent since peaking in April 2004, while home prices hit a plateau and stayed there for most of 2005.
The forecast, a research branch of the Anderson School of Management at University of California, Los Angeles, has typically focused on economic predictions for Los Angeles County, California, and the nation, and San Diego represents a new local area for the forecast.
Ryan Ratcliff, an economist for the UCLA Anderson Forecast, and Alan Gin, an associate professor of economics at the University of San Diego, wrote the report.
While several national real estate economists and analysts are projecting a soft landing for the real estate market this year, that “landing” arrived early in San Diego, and this latest report attempts to sort out whether this local real estate market will suffer a hard fall and harm the region’s economy.
The UCLA Anderson Forecast, Anderson School of Management and The Rady School of Management at University of San Diego participated in the first annual San Diego Economic Outlook Forecast Conference today at the San Diego Marriott Hotel and Marina to discuss the local forecast.
In 2005, the median price of a house was nine times higher than the median income in San Diego, and home prices have roughly doubled in the past six years when adjusted for inflation, according to the economic report.
Price appreciation, though, began to slow in November 2004 and December 2004, and median prices were flat for most of 2005, the forecast noted. The forecast refers to “that crazy B-word” – bubble – that has popped up in many real estate discussions as experts debate whether there will be a devastating burst in local or national real estate markets.
While the word “bubble” seems to suggest that it implies a “pop,” or a period of substantial home-price loss, the Anderson Forecast states that a bubble market is more a situation in which the market price of a home is out of whack with the fundamental value of the asset.
And while the report notes that the Advance Forecast “has advanced its opinion that the real estate markets in Southern California are in a bubble-like state,” it also states that this does not necessarily mean home prices will drop.
Christopher Thornberg, UCLA Anderson Forecast
Christopher Thornberg, a senior economist with the UCLA Anderson Forecast, stated in a summary of the economic outlook, “Housing prices will not plummet … this is not a common characteristic of the end of a housing bubble. Rather they will remain largely stagnant for a number of years until the fundamentals manage to catch up with market prices.”
The forecast by Ratcliff and Gin states, “The central question for San Diego’s economy over the next several years is how this real estate slowdown will affect the wider economy,” noting that the future of San Diego housing markets presents “an interesting puzzle” – there is a low probability of a recession in the next two years though home prices in the area are out of line with such fundamentals as income and rent growth.
“Unfortunately, with no historical parallels to draw on for a recession-less housing slowdown, we can only make an educated guess. Arguments suggest that the answer is more slow growth: sales will continue to fall, but not by the 60 percent we saw in San Diego during the 1990-91 recession.
“Prices will stay flat, rising at or slightly below the rate of inflation – in essence, a pause of several years to let the fundamentals catch up,” the forecast states. “Residential real estate markets have a couple of tough years in store, but in the absence of a recession we do not expect to see a repeat of the mid-1990s.”
So does that mean a soft or a hard landing? The forecast calls for a mix of both: “a mostly soft landing – though harder than the first two years of this real estate slowdown.”
Construction employment is expected to drop at the end of this year, with declines of about 8 percent through the end of 2008. Taxable sales growth should also slow, though strength in tourism and professional services should boost the economy.
“This is a little bit more optimistic than the forecast for other Southern California counties, in large part because San Diego has already lived through two years of slowing real estate markets with little injury,” the forecast concludes.
The median price of existing homes in San Diego County has increased from $449,949 in first-quarter 2004 to $571,212 in first-quarter 2006, a gain of about 27 percent. Sales of existing homes have sunk about 33.8 percent from first-quarter 2004 to first-quarter 2006, and about 17.9 percent from first-quarter 2005 to first-quarter 2006.
Meanwhile, real personal income for area households has remained fairly level during the same period, increasing from $101,823 in first-quarter 2004 to $107,809 in first-quarter 2006 – a gain of 5.9 percent. Average real annual wages in San Diego were about $38,000 in 2005, which is below the state average of about $40,000.
Since 2003, the flow of people moving to San Diego from within the United States has turned from positive to negative, and high home prices are a likely contributor to this shift in migration, the forecast report states.May 3, 2006 at 5:15 PM #24937zkParticipant
Thanks for the info, sdr.
I’m curious why I’m not reading anything about all the whacky loans that people have needed to afford these houses. Do you know whether that was brought up at all? Because I don’t think any discussion of the SD RE market is even relevant, let alone complete, unless it includes an in-depth look at the lending situation.
Also, Alan Gin has always struck me as a permabull. He’s usually called “USD professor,” but he teaches at the real estate institute there, and I’m suspicious of his motivation. I could be totally wrong about that, but he does always seem to focus on the positive aspects of the market and leave out the negative.May 3, 2006 at 6:05 PM #24939BugsParticipant
Nice report SDR, lots of information to absorb. I’d like to echo zk’s question about whether they addressed the effects of financing, interest rate rests and ARMs. I’d also be interested in hearing if they addressed the rising rate of loan defaults and foreclosures.
The overall message I got out of all this was that they have no historical precendents for a decline that has occurred without a recession, and lacking such a precedent their analysis is that there won’t be a serious decline because there is no recession to cause it. That’s why they’re commenting on the effect of a declining real estate trend on the economy as a whole. An overly large decline in real estate could create it’s own weather if the percentage of mortgage servicing incomes does include a disproportionate share of real estate-dependent jobs.
Now I’m wondering if the lack of precedence for a real estate spike that accelerated during a period of recession (as we just experienced) has any correlation to a decline occurring in spite of a lack of recession. Perhaps the Fed’s syncopation of the mortgage rates from the rest of the economy will have a corresponing rebound effect. I dunno, I’m just musing out loud here.
Given the current disconnect between incomes and prices, they must be pretty bullish on employment and wages, ’cause it seems like there’s a long ways to go before those two trendlines merge. Net decreases of population would appear to be working against the price plateau scenario, too, even though some of those move outs are have-nots.
So now if regional employment and wages for the upper end jobs are due to increase significantly, it seems to me that the industries where those mortgage-servicing incomes are increasing should be good bets for investments. That would be a silver lining for folks to rejoice in regardless of what their current status is.May 3, 2006 at 6:25 PM #24943
Thanx and my feeling is that this is probably a little slanted version of what was said as interpreted by the RE industry. PS’s take on it was the complete opposite which pretty much is in line with what I said, which is you could interpret what you heard however you wanted to hear it based upon your preconceived notions.
As for PS, berating on the other thread I don’t beleive I attacked her. The people I spoke with said she was inappropriate in revealing too much personal information (not surprisingly) but they didn’t nor did I attack her questions or opinions. Personally, I was proud of her for making herself heard at this forum. Oh well, I guess you take away from my comments whatever you want based upon preconceived notions…hmmmm…heard that one before.May 3, 2006 at 6:30 PM #24945
I wasnt there so it is hard to say exactly what they said about the arms resetting and exotic financing. The concensus of those that I spoke with said when they were asked about the agressive lending practices, they felt that it would not be a huge problem……. Not sure I agreeMay 3, 2006 at 7:12 PM #24952ocrenterParticipant
–prices will level off…
–wait for the fundamentals to adjust…
–wait for the fundamentals to adjust…
–wait for the fundamentals to adjust…
Prices doubled in the last 5 years.
How long will it take for income to double?May 3, 2006 at 7:55 PM #24953CaliforniabrownbearParticipant
Gin is a permabull. I emailed him once after he was quoted making irrational claims (spewing NAR arguments for rising home prices) in a UT article, but never received a response.May 3, 2006 at 9:18 PM #24954RightSideParticipant
Thanks for the info SDR…one thing really jumped out at me, they said…
“In 2005, the median price of a house was nine times higher than the median income in San Diego.”
This is a big discrepency compared to Rich’s data here…where is this data coming from?May 3, 2006 at 11:30 PM #24958anParticipant
That’s exactly it:
–wait for the fundamentals to adjust…
One way or another, fundamentals will take place. Either hyperinflation and income rise like crazy, or real estate price will fall like crazy. I don’t care how it happen, all I know is it will happen.May 4, 2006 at 12:54 PM #24982zkParticipant
I’m only guessing, but I think Rich is using per capita income while some others use household income. Of course, as long as each compares only apples to apples and doesn’t mix them, it probably doesn’t matter which one they use.
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